HC Deb 08 July 1992 vol 211 cc371-81

'(1) In section 154 of the Income and Corporation Taxes Act 1988 (general charging provision) after subsection (3), there shall be inserted the following subsections:

"(4) The benefits to which this section applies shall exclude any benefit consisting of an employer paying for an employee's journey between work and home where:

  1. (a) the employee is required, by reason of his employment, to work to a time between 9 p.m. and 6 a.m.; and
  2. (b) it would not be reasonable for the employer to expect the employee to use public transport at that time.

(5) For the purposes of subsection (4) above, but without prejudice to the generality of that subsection, there is a presumption that it would not be reasonable for an employer to expect the employee to use public transport where:

  1. (a) public transport has ceased or being substantially curtailed; or
  2. (b) because of the low level of availability or reliability of public transport services at that time, a journey using public transport would be likely to take significantly longer than a journey between work and home at a time between 8 a.m. and 7 p.m.; or
  3. (c) there would be an increased risk to the personal safety of the employee should they travel by public transport at that time.".

(2) In section 153 of the Income and Corporation Taxes Act 1988, after subsection (3), there shall be inserted the following subsection:

"(4) The payments to which this section applies shall exclude any payments made by an employer if, had they been incurred by the employer directly, they would not have been taxable benefits to the employee by virtue of section 154(4) and (5)".

(3) This section shall apply for the year 1992–93 and all subsequent years.'.—[Mr. Nicholas Brown.]

Brought up, and read the First time.

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Mr. Nicholas Brown (Newcastle upon Tyne, East)

I beg to move, That the clause be read a Second time.

The new clause is aimed at addressing the circum-stances in which work-related travel expenses paid by the employer are deductible for income tax purposes, particularly where the employee has to work late. At the moment, journeys between work and home are tax-deductible in certain circumstances, which are set out in the Inland Revenue pamphlet IRI on extra-statutory concessions. The circumstances that the Inland Revenue says are satisfactory for the concessions are these: Where … an employee is occasionally required to work late but those occasions are neither regular nor frequent; and by the time the employee can go home, either public transport between the employee's place of work and home has ceased or it would not be reasonable in the circumstances for the employer to expect the employee to use it". The definitions that are set alongside this are that a requirement to work late means working until 9 pm or later" — that is reflected in our new clause— late working would normally be regarded as frequent if it occurs on more than 60 occasions in a tax year; regular means a predictable pattern, for example if late night transport is provided every Friday. We are arguing that the extra-statutory concession should be made statutory, and our new clause would achieve that.

Before going into the details of the topic, I should emphasise that we are not arguing that, in normal circumstances, travel to work should be allowable for a deduction from income tax. I know that the Financial Secretary will be tempted to attack a target as wide as he can make it, so it is important that we focus on the circumstances in which people have to go home late at night. We are not arguing for a wider concession. We are not discussing normal circumstances. We are discussing those who, because of the nature of their employment, have occasionally to take taxis home after 9 pm.

This is an important matter to us, because it affects the safety of employees in this position who have to face the dangers of travelling home late at night and unaccom-panied, often when the running of whatever public transport is still working may not fit the whole of the work to home travel pattern. I am sure that the House will readily accept that the people most likely to be affected by this are those who work in the licensed trade, such as bar staff, who have to work late into the night.

This is an important matter, because of the number of people employed in this sector. The hotel and catering trade employs 1.1 million of our fellow citizens, many of whom would fall within the ambit of the new clause. Therefore, it is worthy of our consideration and attention, and I hope that it will command the full attention of the House and the Paymaster General, who I know is particularly responsible for some of these matters, at least when it comes to setting the duty on the products retailed to the public by the people whom we are discussing.

I know that the Government hope to bring the wages councils to an end as soon as they can, but at the moment a wages council order sets a minimum wage for the licensed trade. In 1991, it stood at £2.74 an hour, but I understand that the Financial Secretary and his friends think that this is too much, and that the protection afforded to these low-paid workers should be removed.

The full £2.74 an hour is less than half the average hourly pay of manual male workers, which is £5.76 an hour, and two thirds of the average for manual women workers, which is £4 an hour. In 1991, full-time male workers in the hotel and catering trade were paid on average £157.60 a week, and female workers were paid £119.90 a week. Of the 400 or so occupations covered in the new earnings survey, working in the hotel and catering trade was the lowest-paid occupation for men and the joint lowest-paid occupation for women, the other being hairdressing. That will come as a surprise to nobody who is familiar with these matters.

We are discussing the tax treatment of a payment to a substantial number of people—1.1 million—who are among the lowest paid of our fellow citizens. A number of points logically follow from the fact that wages in the licensed trade sector are so abysmal. The first is that it is odd that the Inland Revenue is targeting them for special attention. There cannot he much money involved in the remuneration of the poorly paid. Secondly, it is far less likely, because of the rates of pay, that employees in the hotel and catering industry will have the personal transport that would allow them to travel to and from work. Therefore, it follows that the concession of getting a paid taxi home late at night for their safety is even more significant than might at first be thought.

The third factor that follows from the deplorable rates of pay in this trade are that the earnings are so low that some employees will fall below the £8,500 threshold and therefore will not be eligible for taxation on benefits-in-kind. This is an important issue, and I know that if I do not refer to it, the Financial Secretary will do so. He is always reminding us that real take-home pay is important, and of the great Conservative achievement that it rose throughout the 1980s. However, the benefits-in-kind threshold has not risen with it, and the £8,500 limit was set in 1979–80. Had the limit been raised in line with prices, it would be two and a half times that level, or £21,500. The regulations ensure that liability to income tax on benefits in kind are biting at ever lower income levels, so it logically follows that, year after year, more and more people in the hotel and catering trade will be drawn into the Inland Revenue's net.

When the benefits-in-kind threshold was first set, in an earlier age, I understand that the principle behind it was that it would catch those who were well remunerated and were in a position to get a whole range of benefits in kind on top of a substantial income. It was rightly felt that it would be unfair if such benefits became an extended tax avoidance device. However, at the same time, it was clearly the view that it would be unfair to catch the much smaller scale benefits, if benefits they be, of those who were poorly remunerated. I am thinking in terms of the free coal to mineworkers, or the taxi home late at night for bar staff. However, such is the change in these matters that taxis home for bar staff are very much in danger of being caught.

It might be argued that the threshold of £8,500 is still set sufficiently high to ensure that part-time bar staff are not caught. While I accept that there may be some force in that argument, it is only fair to point out that the threshold includes the value of the taxi home. If someone received £10 a night for a taxi, five times a week, the total cost could be well over 20 per cent. of his total remuneration. When the Inland Revenue examines the notional earnings of bar staff as opposed to their real earnings, it insists on the inclusion of a notional element for tips. Therefore, it is not simply a question of the wage rate; it includes what the Revenue believes the tips to be—and added to that will be the value of the taxi home at night, the benefit in kind. It is likely that many bar workers will cross the £8,500 threshold much more quickly than at first appears to be the case.

Bar staff are not the only people liable to have their taxis home taxed as a benefit in kind, although they are the category most likely to suffer and to be treated unfairly in the way that the Revenue pursues these matters. Other people are driven home if they work late at night—for example, the Financial Secretary. We discussed these matters in the early hours of the morning, when we considered the Bill in Committee. I walked back to my flat, but I saw the hon. Gentleman being driven home in a Government car—[Interruption.] Perhaps I do the hon. Gentleman an injustice; it might have been an illusion due to the time of the morning. However, I am sure that he will concede that it is normal practice for Ministers to be driven home while their counterparts have to walk. I note that the Minister thinks that that is right, and no doubt if I were in his position I would take the same view. I am sure that Ministers are not taxed on their cars home as a benefit in kind, although there may be other considerations in the case of Ministers.

If civil servants have to stay late at night to help us in our deliberations, they have taxis home. I have seen prominent civil servants leaving this place late at night in taxis, which I assume are paid for by their Departments. I do not want to discuss the tax arrangements of any individual, but it is highly unlikely that the Revenue taxes civil servants' taxis home as a benefit in kind.

I understand that journalists who stay here late at night covering our debates could have their taxis home late at night or early in the morning taxed as a benefit in kind. Indeed, there are discussions between the Revenue and the journalists' unions about the tax treatment of the cost of their taxis home. It would be unfair to tax journalists in that way when they have to work here, or anywhere else, late at night, as though the taxi home was a benefit rather than something necessitated by the late hours they work.

Although the group that is undoubtedly most affected, simply by the sheer number of people involved, is the workers in the hotel and catering industry, the issue goes wider and embraces the journalists who cover our debates. It could embrace senior civil servants, but I suspect not. It might even embrace Ministers, although again I suspect not.

6.15 pm

I ask the House to consider whether that is a sensible use of the resources of the Inland Revenue. The effective policing of those arrangements, pub by pub, club by club, throughout the country would require vast resources. I suspect that, in practice, such arrangements cannot be effectively policed. If the Government insisted that they were, the benefit to the Exchequer would be dispropor-tionately small compared with the resources involved.

Time and again, we have pressed the Government about tax avoidance, but we always keep a sense of perspective in our representations. I debated with the hon. Gentleman's predecessor the issues of dual residency and the use of offshore trusts as avoidance devices. Those are large issues that cost the taxpayer billions of pounds a year, but that is not what we are discussing today. Instead, we are discussing the cost of a taxi home and the tax take from that for people who are among the poorest of our fellow citizens.

The avoidance issues are at the heart of the way that the Inland Revenue operates. The Government are absolutely obsessed with investigating what they believe to be the concealed earnings—the hidden perks—of the less well-off. Their priorities should be elsewhere. The Inland Revenue's 1990–91 annual report shows that £1.4 billion was raised from counter-evasion and counter-avoidance activities, so the Government's priorities should lie there. A further £2.5 billion was raised by the Revenue's technical review exercise—the reviewing of company accounts to check that the profits on which corporation tax is paid are as they should be. That sort of exercise should be the Government's priority, not picking on poorly paid bar staff.

The relationship between the cost of compliance and the yield in increased tax is shown by the yield-cost ratio, which is the way that the Government and the Revenue measure these matters. The inquiry branch raised 24 times more than it cost. The ratio was 29:1 for the special office —which together with the inquiry branch form the main pillars of counter-evasion work. Should not the Government place emphasis on that sort of work rather than picking on the poor? The Revenue's activities included company investigations, with a yield of 9:1; accounts investigations, with a yield of 5.5:1; and non-accounts investigations, with an astonishing yield of 47:1.

That sort of work should be the Government's priority if they are serious about clamping down on evasion and targeting resources efficiently. The Financial Secretary should be thinking about doing that rather than picking on the poorest people in society. Our new clause is a modest attempt to bring fairness back into the tax system— something that the Conservative party is reluctant to agree to in practice.

The Financial Secretary to the Treasury (Mr. Stephen Dorrell)

The new clause would exempt from income tax the provision of late-night transport by employers. The hon. Member for Newcastle upon Tyne, East (Mr. Brown) was at pains to stress that it was not his purpose to argue against the general principle that provision of home-to-work transport should be taxed as a benefit; he accepts that the tax system is built on such principles, and he regards that as correct. He said that he wanted to enshrine in legislation the extra-statutory concession A66, which sets out the circumstances in which an employee is not taxed if his or her employer provides late-night transport.

As the hon. Gentleman pointed out, the terms of the extra-statutory concession are quite narrow. They require a journey during unsocial hours to be neither "regular" nor "frequent". The hon. Gentleman wants to remove that test of regularity and frequency from the concession before it is written into the statute book. It is therefore not quite accurate to describe new clause 13 simply as a measure to "legislate" the concession; the hon. Gentleman's ambition is slightly wider.

The new clause would write an important new loophole into income tax law. It would remove the test of regularity and frequency from the concession, allowing employers to provide their employees with tax-free transport if those employees were returning home between 9 pm and 6 am. That would be the most important test: night workers would be entitled to a concession allowing their transport between home and work to be paid for regularly by their employers without paying tax on that benefit.

Such a concession strikes me as too wide to write into the tax system. The hon. Gentleman, understandably, stressed the implications for the hotel and catering sector, emphasising that many workers in that sector are relatively low paid. That is true, of course—although plenty of workers in that and other sectors are not low paid, but work unsocial hours. I am not sure why they should benefit from such a concession ahead of workers in other sectors who may be paid significantly less, but who are not provided with tax-free transport between home and work. I do not feel that the simple test of working hours is a sufficient basis on whch to exempt transport between home and work from income tax.

I understand the case made by the hon. Gentleman and others about the potential risk to personal safety posed by travel undertaken late at night. That is one of the motives behind the well-established extra-statutory concession. The risk to personal safety is greatest when employees are working late at night on an irregular basis; the chances are that an employee working late on a regular basis will make arrangements to avoid threats to personal safety.

Mr. John Townend (Bridlington)

I do not entirely understand that argument. If it is dangerous for a young girl to travel home late one night, it will be equally dangerous for her to do so on two or three nights. I know that from experience. I am involved in the hotel industry and my daughter, aged 18, once had a low-paid job in central London. Her employers operated the rule that if employees worked until later than about I am, they should be sent home in taxis. I was grateful for that rule; I did not like to think of my 18-year-old daughter travelling home through central London at that hour.

My daughter did not work late every night, but she worked late regularly, several nights a week. I do not understand my hon. Friend's argument that regular late-night travel is not so dangerous as irregular late-night travel.

Mr. Dorrell

If that had been my argument, I would understand my hon. Friend's mystification. I was arguing not that such travel was any less dangerous if undertaken regularly, but that if it was undertaken regularly as part of the normal course of employment, it was reasonable to expect employer and employee to make arrangements to avoid the hazards associated with it. Employees are at greatest risk when they have made no such arrangements and do not know how they will get home. I feel that the taxing of those who find themselves having to work late on an irregular basis, with no arrangements for getting home safely, is most objectionable.

Mr. Townend

If such arrangements are made because the employee must undertake late-night travel regularly, why should they be taxed as a benefit in kind? I do not understand the logic.

Mr. Dorrell

I am coming to that. When an employee plans to work late as part of his employment, he knows that he will have to travel at times when there is not much public transport. He will have to find a way of getting home at such times. Surely it is reasonable for that to be reflected in the agreements reached with the employer in regard to remuneration and other terms and conditions of employment.

Mr. Clive Betts (Sheffield, Attercliffe)

If an employee must regularly make arrangements for getting home late at night, he will probably decide to take a taxi, as will employees who work late on an irregular basis. The cost will be exactly the same in both cases. Why does the Financial Secretary suggest that those benefits—as he sees them—should be taxed differently?

Mr. Dorrell

That is the point. If late-night travel is undertaken regularly, it is reasonable to expect employer and employee to agree terms which cover the extra cost. If it is undertaken irregularly, there will be no need for the terms of employment to cover the cost. When employees have to go home late in exceptional circumstances, that will be an exceptional cost associated with the employment. People who have to work late regularly should agree wages which cover the cost of late-night travel before taking on such employment because it is not exceptional but an obligation that is expected from the outset.

The person who is in the worst position is the employee whose late-night travel is unexpected, and whose conditions of employment do not cover the extra cost. That is the key proposition on which the extra-statutory concession is based. The cost of regular late-night travel should be included in the wages agreement; if an employee is not satisfied with the conditions—including the requirement for late-night travel—it is open to him to argue with his employer. The employee is in the worst position when he or she is required irregularly and at short notice to take on that cost. In those circumstances, it would not be reasonable to ask the employee to pay tax. That is why extra-statutory concession A66 exempts the employee from tax.

Mr. Townend

Does my hon. Friend not agree that acceptance of his view could result in sex discrimination? He is saying that the employee has to negotiate with the employer to secure extra salary to pay for a taxi. It might well not be unreasonable for a strong boy 6 ft tall and 18 years old to walk a mile or a mile and a half at half past one in the morning, but in the case of a girl of 17 it would be extremely dangerous. My hon. Friend has not convinced me at all. Clearly he does not have much knowledge or experience of the hotel industry, as I have.

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Mr. Dorrell

I realise that my hon. Friend has a lifetime's experience in the hotel and catering industry, whereas I do not for one moment pretend that I have. However, I am not sure that I can accept the proposition that we should design the tax system in such a detailed way as to take account of my hon. Friend's point. We should have to provide for tax-free late-night travel for women but not for men—maybe even for small women and not for big women. We cannot make the tax system as precise as that.

The proposition on which I base my argument is simply that in normal circumstances the cost of travel between home and work is expected, in general, to be met by employees out of their after-tax earnings. It seems to me that that should apply as much to people who work late and unsocial hours as to the rest of us. Only in the special circumstances of the requirement to work late at night on an irregular basis is a tax concession justified. On that basis I recommend that the new clause be not accepted.

Mr. Nicholas Brown

I do not suppose that the same arguments would be advanced if we were discussing this matter in the context of Ministers rather than bar staff. It could hardly be argued that lady members of the Cabinet should be provided with cars to take them home late at night while gentleman members should be required to walk—whatever the Financial Secretary says about his willingness to walk rather than be driven home in the early hours of the morning. I am sure that the Financial Secretary will accept that it is not the intention of the parliamentary Labour party to create a new tax loophole. On the contrary, to my certain knowledge, in the debates on Finance Bills over the last five years the parliamentary Labour party has tried to close tax loopholes, so it would be odd if, even inadvertently, we were to create a new one.

There is some strength in the Financial Secretary's argument that those whose occupations require them to work late should have their hours taken into account when the terms and conditions of employment are being settled. Where things are equally balanced, that is probably what happens in practice, and the disadvantages of working late are probably reflected in salary. It is fair for the Financial Secretary to observe that late-night working can be taken into account in the employer-employee arrangement without further provision through the tax system, but that argument applies only where employer and employee have something like equal bargaining strength. The Financial Secretary's argument is less strong in respect of those working in the hotel and catering industry, who by any definition are low paid. The Financial Secretary referred to those people as being relatively low paid. I repeat that of the 400 occupations included in the new earnings survey, hotel and catering work attracted the lowest pay in the manual work sector, and among women workers those in the hotel and catering industry were joint lowest with those in the hairdressing industry. Those people are not relatively low paid; they are absolutely low-paid.

One of the reasons for that is that their bargaining position is not so strong as that of people in the industrial sectors, where claims can be asserted with more vigour.

The industry is noted for its transiency, and the low wages probably have some bearing on that. I suspect—though I cannot offer any evidence for this—that the average age is lower than in the work force as a whole. The industry is noted for seasonal employment and for the fact that it offers jobs to casual workers, some of them students trying to earn some money during the summer.

It should be pretty obvious to the whole House that such people are not in a strong bargaining position. They are not able to say, "I won't take the job unless the wages council rate is topped up by an amount to cover the cost of getting home late at night." That is not a practical proposition, and the purpose of the new clause is to deal with the circumstances arising from the fact that it would not be practical for this matter to be taken into account in the employer-employee relationship. I suppose that it follows logically that we should have put an earnings ceiling on the concession. The Financial Secretary did not make that suggestion, but it follows logically from his arguments, too. It would have been legitimate for him to make such a proposal. The idea has some attractions, and if its absence from the new clause makes the provision imperfect, that will explain why I do not intend to press it to a vote.

The Opposition's main concern is not the generality of the way in which this benefit is treated but how it bears down specifically on poorly paid workers, who may be substantially disadvantaged by the way in which it operates in practice. We are worried about precisely the circumstances that the hon. Member for Bridlington (Mr. Townend) described when he brought to the House his experience of these matters. It is frightening for a young lady of 17 or 18 to be required to get herself home at half past eleven at night when public transport has ceased altogether or is very infrequent and in any event may not get her from her actual place of work to the safety of her home. Safety is at the heart of our concern.

We are not seeking to establish some great loophole of which the very wealthy can take advantage; we are seeking to ensure that a girl of 17 or 18 can get home in safety. At the very least, the tax system should not create a disincentive in that regard. The whole House will agree that we should do all that we can to assure the safety of vulnerable people.

I emphasise again the importance of keeping a sense of proportion in these matters. Really efficient use of the Revenue's time is not achieved by the pursuit of some student bar worker in respect of the very limited concession—if concession it is—of a taxi ride home. It is a waste of the Revenue's time. The Revenue can make effective use of its time elsewhere—by pursuing corporate evasion, not by pursuing innocent and very poorly paid students. I am sure that the Financial Secretary has taken that point on board. I do not intend, therefore, to divide the House on the new clause.

Mr. Robert Sheldon (Ashton-under-Lyne)

I agree with my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) that the new clause should not be pressed to a vote. I apologise for not having been here for the whole debate—I was attending a meeting of the Public Accounts Committee—but I have been here long enough to get the flavour of it.

The Inland Revenue and the Treasury are frightened by anything that might lead to a loss of revenue. However, the way of earning a living, particularly during the last 10 years, has undergone fundamental changes. Large costs are involved nowadays in earning a living. People travel much further to work than they ever used to do. They have to wear far better clothes. They have meals in the canteen, or elsewhere. In the past, many people lived just along the road from their factory. They wore work clothes and they had butties for their meals. Many pounds are now spent each week on transport, clothes and food. None of that is allowable against income tax. Yet those items are an essential part of earning a living. That was not so in the past.

I recognise the obvious problems involved here, but people can be discouraged from seeking employment because they know that they will be unable to claim some of those considerable expenses against tax. I was interested in the suggestion made by my hon. Friend the Member for Newcastle upon Tyne, East that a ceiling could possibly be placed on any concession. Another ceiling which might be placed on any concession is that the place of employment should be no more than a certain distance from a person's home.

We all recognise that we must try to prevent loss of revenue of the kind envisaged, but at some stage in the future the cost of earning a living must be related to the income tax that a person pays. My hon. Friend was right to give the subject an airing.

Mr. Nicholas Brown

I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)

We now turn to new clause 15.

Mr. Nick Harvey (North Devon)

In the absence of the hon. Members for Leeds, North-West (Dr. Hampson) and for Bexleyheath (Mr. Townsend), in whose name the new clause stands, it would be regrettable if this valuable opportunity to give a boost to the—

Mr. Deputy Speaker

Order. I am advised by the Clerk that only a Member whose name is attached to a new clause can move it, so I am afraid that the hon. Member is out of order.

Mr. A. J. Beith (Berwick-upon-Tweed)

On a point of order, Mr. Deputy Speaker. Would it not have been a courtesy to the House if those hon. Members who placed the new clause on the Amendment Paper had not left us in the position of being unable to debate the new clause? I know that a number of hon. Members would have liked to take part in that debate.

Mr. Deputy Speaker

That is not a matter for the Chair. It is a matter for the hon. Members for Leeds, North-West (Dr. Hampson) and for Bexleyheath (Mr. Townsend). I have no doubt. however, that the right hon. Gentleman's words will have been noted.

Dr. Norman A. Godman (Greenock and Port Glasgow)

Further to that point of order, Mr. Deputy Speaker. I had hoped to take part in the debate on the new clause. It has important implications for many people in maritime communities in Scotland. Were you informed at any stage that those two Members would not be present this evening?

Mr. Deputy Speaker

I personally had not been informed, and I am not aware that the previous occupant of this Chair was informed.

Mr. Peter Bottomley (Eltham)

Further to that point of order, Mr. Deputy Speaker. It is possible that we have made faster progress than was expected. That may be the reason why my hon. Friends are not here. It sometimes happens.

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