HC Deb 13 May 1998 vol 312 cc483-90

Lords amendment: No. 82, before clause 75, to insert the following new clause—Expenditure for facilitating transfer of functions etc.

  1. ".—(1) The Secretary of State and the Commissioners of Inland Revenue may incur expenditure in doing anything which in his or their opinion is appropriate for the purpose of facilitating either of the following things, namely—
    1. (a) the transfer to the Commissioners of such of the functions of the Secretary of State as are exercisable by the Contributions Agency; and
    2. (b) the exercise by the Commissioners of those functions.
  2. (2) The powers conferred by subsection (1) above—
    1. (a) shall be exercisable whether or not Parliament has given any approval on which either of the things there mentioned depends; and
    2. (b) shall be without prejudice to any power conferred otherwise than by virtue of that subsection.
  3. (3) Any expenditure incurred under this section shall be defrayed out of money provided by Parliament.
  4. (4) In its application to Northern Ireland, this section shall have effect with the following modifications, namely—
    1. (a) for the first reference to the Secretary of State there shall be substituted a reference to the Department of Health and Social Services for Northern Ireland;
    2. (b) for the reference to such of the functions of the Secretary of State as are exercisable by the Contributions Agency there shall be substituted a reference to such of the functions of that Department as correspond to those functions; and
    3. 484
    4. (c) for the reference to money provided by Parliament there shall be substituted a reference to money appropriated by Measure of the Northern Ireland Assembly."

Mr. Denham

I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker (Mr. Michael Lord)

With this, it will be convenient to take Lords amendment No. 96.

I inform the House that the amendment involves privilege.

Mr. Denham

The Government brought forward in another place amendments to give effect to the national insurance reforms announced in the Budget, and we have debated those separately. For one of the reforms—the transfer of the Contributions Agency to the Inland Revenue from April 1999—the Government need additional powers. They are designed to allow the Government to incur necessary preparatory expenditure in advance of the enactment of the substantive legislation that would effect the transfer. That is the purpose of amendments Nos. 82 and 96.

The transfer of the Contributions Agency to the Inland Revenue represents a major streamlining of the system, which will benefit employers and individual contributors alike. We want to ensure that the transfer takes place as quickly and smoothly as possible. We plan to bring forward appropriate legislation to transfer operational functions to the Inland Revenue in due course. However, finalising the details in time for a new Bill to be introduced in this Session has not proved possible.

Providing continuity of service to contributors and employers in moving to the new merged organisation is vital. There is much to be done to achieve that: we must change computer systems; forms and leaflets must be redesigned; and employers need to be kept informed. We need to start making operational preparations in good time so that, in the event of legislation being enacted to effect the changes, there is no risk of disruption of service in April 1999. That is prudent management designed to ensure that the transfer meets its central aim—improving service to employers and contributors alike.

Amendment No. 82 and the consequential amendment linked to it, No. 96, are designed to ensure that there is no doubt about the propriety of spending the right amount at the right time to make the necessary preparations for the transfer. They provide an essential step towards a smooth and speedy shift of responsibilities, and I commend them to the House.

Mr. Waterson

The aim of the provision is clear, and I am grateful to the Minister for explaining it. However, it is extraordinary that we are debating the proposal for the very first time so late at night; the matter was first raised in another place. Everyone agrees that it is important.

As the Minister said in his recent letter setting out his intentions, which was much appreciated, the provision would enable preparatory expenditure in advance of the substantive legislation. He said: It will help the two Departments to share experience, knowledge and skills in combating avoidance and will make better use of resources. The Government decided to introduce the paving power in this Bill as it was the earliest suitable legislative vehicle. Conservative Members dispute that. It should have been dealt with in the usual and, we would say, the proper way, not tacked on to the end of a substantial Bill that has already been in Committee.

The policy is hopelessly muddled—which is all too typical of the Government, whether in social security or in other spheres of government—and no substitute for meaningful and radical welfare reform. That view was expressed in the other place, where Baroness Hollis talked of "streamlining". The Minister also used that word and, as was said in the Lords, we heard that substantive legislation would be tabled "in due course". He told us when that would not happen—that is, during this Session—but I press him a little more on when the legislation will be ready. Will he produce a draft Bill for comment and consultation?

10.45 pm

There was considerable debate in the Lords about what the proposals mean. The transfer of authority would constitute a clear breach of the contributory principle. That is our main objection. It would not only go against everything that the Minister for Welfare Reform has ever said about welfare reform, but would clearly contradict the Government's attempt to restore the contributory principle through their stakeholder pension plans. On 21 December 1997, The Sunday Telegraph reported a remark on that subject: I do not believe that the contributory principle should be set aside, and certainly not without the most careful thought and full discussion. I entirely associate myself and my hon. Friends with the words of the Secretary of State for Education and Employment.

Our view is that the proposals put the cart before the horse. They make no sense; we need thoroughgoing proposals for welfare reform. The March 1998 Green Paper on the subject stated that changes to the National Insurance scheme provide an opportunity to update the contributory principle. We will examine the link between paying contributions and earning entitlements to benefits with a view both to simplifying further administration of the scheme for employers and emphasising the link between work and earning benefit entitlement. How do the Government square their decision to merge the Contributions Agency and the Inland Revenue with the commitment to update the contributory principle? The proposed merger appears to be a first step in a more far-reaching programme of tax and benefits integration, although the word "integration" did not find favour with Baroness Hollis, who preferred to talk about "alignment", whatever that may mean. It is another spin doctor-manufactured word.

A number of problems are involved with merging taxes and benefits, none of which has been satisfactorily addressed by the Government so far. First, whereas assessment for taxes is based on individual income, assessment of eligibility for benefits is usually based on the family unit. The Government are already in a mess of their own making over their attempt to square that circle in the working families tax credit package. Secondly, there is the problem of the period of assessment. Taxes are assessed annually, but benefits are based on short-term need. The assessment of a benefit claim, therefore, is logically based on a much shorter period.

The Government's stakeholder pension proposals are said to be aimed at strengthening the contributory principle and bringing people on low or irregular pay into the system. That policy objective will be undermined by the decision to push for further integration of tax and benefits. It is perfectly clear, as it has been for the past year or more, that the Government cannot agree among themselves on a single course for their welfare reform project, which is one of their flagship policies.

It is a fiction to suggest that national insurance contributions are not a tax in every sense of the word. We have heard about the definition, or lack thereof, of the word "alignment", which was used in the other place. What savings does the Minister envisage resulting from the policy? It was stated in the other place that the estimate of 200 jobs saved should be a gross underestimate. It is clear to the Opposition that there are a considerable number of problems with the policy, which have not been thought through by the Government. They are putting the cart before the horse. It would be unwise for the Government to proceed with this further integration of tax and benefits unless those problems have been properly addressed. In those circumstances, we cannot support the amendment and we shall press it to a vote.

Mr. Peter Bottomley

I agree strongly with my hon. Friend the Member for Eastbourne (Mr. Waterson). In another place, my predecessor Lord Higgins made the point that this matter ought to have formed a separate Bill, or should have been included in a Finance Bill.

Anyone who has actually considered the new clause will notice that subsection (4) is uncontroversial, in that it applies to Northern Ireland that which would otherwise apply to the rest of the United Kingdom. Subsection (3) states: Any expenditure incurred under this section shall be defrayed out of money provided by Parliament", which is fairly normal. However, when one reaches subsections (1) and (2), one finds that, if not quite Henry VIII, they are at least Henry VII, if I can put it that way. They basically say that, whatever other provision Parliament makes, the Government can spend money on what they want in respect of this matter.

There are particular issues relating to the amalgamation of national insurance contributions and taxation, whether from the point of view of the employer or the employee, employment or unemployment, or of better administration. Those issues deserve more than a 20-minute debate on the Floor of the House of Commons after 10 o'clock at night. The Government, backed up by their vast serried ranks of Members who were not here for the debate, may be able to force the new clause through, but they ought to feel ashamed of the way in which they have abused their position in Parliament. I hope that the people will notice what they have done tonight.

Mr. Denham

I explained earlier the importance of enabling the preparatory work to take place, so that the transfer could take place smoothly and effectively next April. I believe that the Bill, concerned as it is with both national insurance matters and our proposals to simplify and streamline the benefits system, is an entirely appropriate way in which to bring those matters before the House and ensure that the preparatory work can be done. Of course, further legislation will be required to effect the transfer and, at that stage, there will be appropriate and full scrutiny of the detail of our proposals. I do not believe that there is an issue on that score.

The hon. Member for Eastbourne (Mr. Waterson) said that there is no sense at all in the proposal, unless we get rid of the contributory principle, but we disagree. We believe that bringing the two organisations together so that employers have to work with only one organisation will be simpler for business, albeit that at the point of merger and beyond there will be two systems—a tax system and a national insurance system with their different requirements. It will be easier for employers to work with one organisation, and the change will give us an opportunity to streamline our operations and simplify our procedures. That is worth doing, irrespective of any future reforms.

The hon. Gentleman rightly quoted the words of the welfare reform Green Paper, that there are opportunities to modernise and update the contributory principle, to simplify it for employers and to strengthen the link between work and earning entitlements to benefits. We shall take that work forward, but I disagree that there is no point in proceeding on the basis of the current system.

The hon. Gentleman asked about savings. The main purpose of the change is to simplify matters by combining the activities of the two bodies. As we have said publicly, we expect some 200 jobs to be saved after April, from a combined work force of 60,000.

We want to provide a better service for employers. The Government's proposal has been welcomed throughout the business community, and I think that businesses will be astounded to discover that the official Opposition have tried to block it by taking an anti-business, anti-employer stance.

Question put, That this House doth agree with the Lords in the said amendment:—

The House divided: Ayes 257, Noes 119.

Division No. 275] [10.55 pm
Ainger, Nick Brown, Rt Hon Nick (Newcastle E)
Alexander, Douglas Browne, Desmond
Allan, Richard Buck, Ms Karen
Anderson, Janet (Rossendale) Burden, Richard
Ashton, Joe Burgon, Colin
Atkins, Charlotte Burnett, John
Barnes, Harry Campbell, Alan (Tynemouth)
Barron, Kevin Campbell, Mrs Anne (C'bridge)
Battle, John Campbell, Menzies (NE Fife)
Begg, Miss Anne Campbell-Savours, Dale
Benn, Rt Hon Tony Canavan, Dennis
Benton, Joe Caplin, Ivor
Berry, Roger Casale, Roger
Best, Harold Chapman, Ben (Wirral S)
Betts, Clive Chaytor, David
Blears, Ms Hazel Chisholm, Malcolm
Blizzard, Bob Church, Ms Judith
Borrow, David Clapham, Michael
Bradley, Keith (Withington) Clark, Paul (Gillingham)
Bradshaw, Ben Clarke, Charles (Norwich S)
Clelland, David Hughes, Simon (Southwark N)
Clwyd, Ann Hurst, Alan
Coaker, Vernon Hutton, John
Coffey, Ms Ann Illsley, Eric
Cohen, Harry Jackson, Helen (Hillsborough)
Coleman, Iain Jamieson, David
Colman, Tony Jenkins, Brian
Cook, Frank (Stockton N) Johnson, Alan (Hull W & Hessle)
Cooper, Yvette Jones, Barry (Alyn & Deeside)
Cotter, Brian Jones, Ms Jenny (Wolverh'ton SW)
Cousins, Jim
Crausby, David Jones, Dr Lynne (Selly Oak)
Cryer, Mrs Ann (Keighley) Keeble, Ms Sally
Cryer, John (Hornchurch) Keen, Alan (Feltham & Heston)
Cummings, John Kennedy, Charles (Ross Skye)
Cunningham, Rt Hon Dr John (Copeland) Kidney, David
King, Andy (Rugby & Kenilworth)
Cunningham, Jim (Cov'try S) King, Ms Oona (Bethnal Green)
Dalyell, Tam Kingham, Ms Tess
Darvill, Keith Kirkwood, Archy
Davey, Edward (Kingston) Ladyman, Dr Stephen
Davey, Valerie (Bristol W) Laxton, Bob
Davies, Rt Hon Denzil (Llanelli) Leslie, Christopher
Davies, Geraint (Croydon C) Levitt, Tom
Davies, Rt Hon Ron (Caerphilly) Lewis, Terry (Worsley)
Dean, Mrs Janet Linton, Martin
Denham, John Livingstone, Ken
Dismore, Andrew Llwyd, Elfyn
Dobbin, Jim Lock, David
Doran, Frank Love, Andrew
Dowd, Jim McAvoy, Thomas
Eagle, Maria (L'pool Garston) McCabe, Steve
Ellman, Mrs Louise McCafferty, Ms Chris
Ennis, Jeff McCartney, Ian (Makerfield)
Etherington, Bill McDonnell, John
Field, Rt Hon Frank McIsaac, Shona
Fitzpatrick, Jim Mackinlay, Andrew
Fitzsimons, Lorna McNamara, Kevin
Flint, Caroline McNulty, Tony
Flynn, Paul MacShane, Denis
Foster, Michael J (Worcester) Mactaggart, Fiona
Galloway, George McWalter, Tony
Gapes, Mike McWilliam, John
Gardiner, Barry Mahon, Mrs Alice
George, Andrew (St Ives) Mallaber, Judy
George, Bruce (Walsall S) Marshall, David (Shettleston)
Gerrard, Neil Marshall, Jim (Leicester S)
Gibson, Dr Ian Martlew, Eric
Gilroy, Mrs Linda Meale, Alan
Godman, Dr Norman A Merron, Gillian
Goggins, Paul Michael, Alun
Golding, Mrs Llin Michie, Bill (Shef'ld Heeley)
Gordon, Mrs Eileen Milburn, Alan
Gorrie, Donald Miller, Andrew
Griffiths, Jane (Reading E) Mitchell, Austin
Grogan, John Moonie, Dr Lewis
Hall, Mike (Weaver Vale) Moran, Ms Margaret
Hall, Patrick (Bedford) Morgan, Alasdair (Galloway)
Hamilton, Fabian (Leeds NE) Morgan, Ms Julie (Cardiff N)
Hanson, David Morley, Elliot
Harman, Rt Hon Ms Harriet Mudie, George
Heal, Mrs Sylvia Mullin, Chris
Healey, John Murphy, Denis (Wansbeck)
Heath, David (Somerton & Frome) Murphy, Jim (Eastwood)
Henderson, Ivan (Harwich) Norris, Dan
Hepburn, Stephen Oaten, Mark
Heppell, John O'Brien, Mike (N Warks)
Hesford, Stephen O'Neill, Martin
Hill, Keith Organ, Mrs Diana
Hodge, Ms Margaret Palmer, Dr Nick
Hoey, Kate Pearson, Ian
Hope, Phil Pendry, Tom
Hopkins, Kelvin Perham, Ms Linda
Hoyle, Lindsay Pickthall, Colin
Hughes, Ms Beverley (Stretford) Pike, Peter L
Hughes, Kevin (Doncaster N) Pond, Chris
Pope, Greg Stinchcombe, Paul
Pound, Stephen Stringer, Graham
Prentice, Ms Bridget (Lewisham E) Stuart, Ms Gisela
Prentice, Gordon (Pendle) Sutcliffe, Gerry
Prescott, Rt Hon John Swinney, John
Prosser, Gwyn Taylor, Rt Hon Mrs Ann (Dewsbury)
Purchase, Ken
Radice, Giles Taylor, David (NW Leics)
Rammell, Bill Thomas, Gareth R (Harrow W)
Rapson, Syd Timms, Stephen
Reed, Andrew (Loughborough) Tipping, Paddy
Rendel, David Todd, Mark
Robertson, Rt Hon George (Hamilton S) Touhig, Don
Truswell, Paul
Roche, Mrs Barbara Turner, Dr George (NW Norfolk)
Rooker, Jeff Twigg, Derek (Halton)
Rooney, Terry Twigg, Stephen (Enfield)
Rowlands, Ted Vaz, Keith
Roy, Frank Vis, Dr Rudi
Ruane, Chris Wallace, James
Sanders, Adrian Ward, Ms Claire
Sawford, Phil Wareing, Robert N
Sheerman, Barry Watts, David
Whitehead, Dr Alan
Simpson, Alan (Nottingham S) Williams, Alan W (E Carmarthen)
Singh, Marsha Willis, Phil
Skinner, Dennis Winnick, David
Smith, Rt Hon Andrew (Oxford E) Winterton, Ms Rosie (Doncaster C)
Smith, Angela (Basildon) Wood, Mike
Smith, John (Glamorgan) Woolas, Phil.
Smith, Sir Robert (W Ab'd'ns) Worthington, Tony
Snape, Peter Wright, Anthony D (Gt Yarmouth)
Soley, Clive Wright, Dr Tony (Cannock)
Spellar, John
Starkey, Dr Phyllis Tellers for the Ayes:
Stewart, David (Inverness E) Jane Kennedy and
Stewart, Ian (Eccles) Mr. Robert Ainsworth.
Ainsworth, Peter (E Surrey) Fowler, Rt Hon Sir Norman
Amess, David Fox, Dr Liam
Ancram, Rt Hon Michael Fraser, Christopher
Arbuthnot, James Garnier, Edward
Atkinson, Peter (Hexham) Gibb, Nick
Beggs, Roy Gillan, Mrs Cheryl
Bercow, John Gorman, Mrs Teresa
Blunt, Crispin Gray, James
Boswell, Tim Green, Damian
Bottomley, Peter (Worthing W) Greenway, John
Brady, Graham Grieve, Dominic
Brazier, Julian Hamilton, Rt Hon Sir Archie
Browning, Mrs Angela Hammond, Philip
Bruce, Ian (S Dorset) Hawkins, Nick
Burns, Simon Hayes, John
Butterfill, John Heathcoat-Amory, Rt Hon David
Chapman, Sir Sydney (Chipping Barnet) Horam, John
Howard, Rt Hon Michael
Chope, Christopher Howarth, Gerald (Aldershot)
Clappison, James Hunter, Andrew
Clark, Rt Hon Alan (Kensington) Jack, Rt Hon Michael
Clarke, Rt Hon Kenneth (Rushcliffe) Jackson, Robert (Wantage)
Johnson Smith, Rt Hon Sir Geoffrey
Clifton-Brown, Geoffrey
Collins, Tim King, Rt Hon Tom (Bridgwater)
Davies, Quentin (Grantham) Kirkbride, Miss Julie
Davis, Rt Hon David (Haltemprice) Laing, Mrs Eleanor
Day, Stephen Lait, Mrs Jacqui
Dorrell, Rt Hon Stephen Leigh, Edward
Duncan, Alan Letwin, Oliver
Duncan Smith, Iain Lewis, Dr Julian (New Forest E)
Emery, Rt Hon Sir Peter Lidington, David
Evans, Nigel Lilley, Rt Hon Peter
Fabricant, Michael Loughton, Tim
Fallon, Michael Luff, Peter
Flight, Howard Lyell, Rt Hon Sir Nicholas
Forth, Rt Hon Eric MacGregor, Rt Hon John
MacKay, Andrew Spring, Richard
Maclean, Rt Hon David Stanley, Rt Hon Sir John
McLoughlin, Patrick Steen, Anthony
Madel, Sir David Streeter, Gary
Malins, Humfrey Swayne, Desmond
Maude, Rt Hon Francis Syms, Robert
Mawhinney, Rt Hon Sir Brian Tapsell, Sir Peter
May, Mrs Theresa Taylor, Ian (Esher & Walton)
Moss, Malcolm Taylor, John M (Solihull)
Nicholls, Patrick Thompson, William
Norman, Archie Tredinnick, David
Ottaway, Richard Trend, Michael
Page, Richard Tyrie, Andrew
Paice, James Wardle, Charles
Paterson, Owen Waterson, Nigel
Pickles, Eric Wells, Bowen
Prior, David Whitney, Sir Raymond
Randall, John Widdecombe, Rt Hon Miss Ann
Robathan, Andrew Wilkinson, John
Robertson, Laurence (Tewk'b'ry) Willetts, David
Ruffley, David Woodward, Shaun
St Aubyn, Nick Young, Rt Hon Sir George
Simpson, Keith (Mid-Norfolk)
Soames, Nicholas Tellers for the Noes:
Spelman, Mrs Caroline Mr. James Cran and
Spicer, Sir Michael Mr. Oliver Heald.

Question accordingly agreed to.

Lords amendment agreed to [Special Entry].

Lords amendments Nos. 83 to 165 agreed to.

Lords amendment No. 166 and Government amendment (a) thereto agreed to [Special Entry].

Lords amendments Nos. 167 to 184 agreed to.

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