HC Deb 28 January 2004 vol 417 cc323-36

Not amended in the Standing Committee, considered.

Order for Third Reading read.

1.5 pm

The Paymaster General (Dawn Primarolo)

I beg to move, That the Bill be now read the Third time.

We have reached the final stages of our deliberations. I am pleased to tell hon. Members that the measure has all-party support. It may not be unprecedented for not a single amendment or new clause to be tabled on a Government programme Bill, but it is unusual. It demonstrates clearly that the provisions are undeniably sensible and useful and therefore rightly welcomed by all interested parties.

The hon. Member for North Norfolk (Norman Lamb) said on Second Reading that the Bill was an uncontroversial and constructive Bill." —[Official Report, 6 January 2004; Vol. 416, c. 204.] He said that he had asked employers' representatives and other tax and national insurance practitioners whether they had any difficulties with the measure, and found that they did not. The hon. Member for Hertford and Stortford (Mr. Prisk) agreed that although the Bill was technical—that was our conclusion, too, when we had finished the Committee proceedings—it included matters that affect every employee and company in the land."—[Official Report, Standing Committee D, 13 January 2004; c. 42.], so it was important. He, too, offered his support.

We received one representation, which arrived rather late for consideration during our proceedings. The Institute of Chartered Accountants in England and Wales welcomed the Bill and did not disagree with any of its provisions. However, it wanted to draw my attention as Paymaster General to some additional matters for which further relaxation of the rules about the way in which employers meet their national insurance obligations could be considered.

Some changes to the provisions for employers' recovery of primary national insurance contributions could be addressed through changes in regulation. Inland Revenue officials will continue to speak to employers' representatives about such details. However, I have concluded that there should be no such changes to regulations and that changes to the Bill at this stage were undesirable. For the benefit of Opposition Members, and for the sake of the completeness of our consideration, however, I thought that it would be helpful to respond to the points made by the Institute of Chartered Accountants.

Mr. Andrew Miller (Ellesmere Port and Neston) (Lab)

I, too, think that the Bill is a sensible measure. My right hon. Friend has helpfully included a glossary of abbreviations in the explanatory notes—an extremely helpful document—but to assist lay people such as me, and, I hope, members of the public who have to interpret such things, particularly those in small businesses, will she do her best to explain the meanings of some of those terms? For example, ITEPA 2003 keeps cropping up. I have worked out what that means, but I would struggle with many of the other abbreviations—

Madam Deputy Speaker (Sylvia Heal)

Order. That is getting rather lengthy for an intervention.

Dawn Primarolo

I am happy to try to assist my hon. Friend when I can. He was not a member of the Standing Committee, but I draw his attention to the considerable discussion in Committee of the fact that the Bill is intended to align the treatment and recovery of national insurance with the procedures that currently exist in the income tax regulations and Acts. Of course, as the Committee agreed, that will be of great benefit to employers, because they will have one procedure and one form of operation for the recovery of any outstanding payments of either tax or national insurance. That is particularly welcomed by employers.

Norman Lamb (North Norfolk) (LD)

The Paymaster General mentioned the representation that she has received. Is she saying that she has decided not to legislate further with regard to that representation at the moment but that she might consider doing so at a later date, or is she rejecting the representation out of hand? Perhaps she can outline on which issues she intends to take further steps.

Dawn Primarolo

I am grateful to the hon. Gentleman for that intervention. I thought that, in courtesy to the House, I should explain where the Government stand with regard to each of the proposals made by the Institute of Chartered Accountants. I hope to make it clear that the Government stand open to representations and further consultation on this matter, as on any other. I shall turn briefly to the issues raised by the institute, and I think that my response will cover the hon. Gentleman's specific inquiry.

The institute asked for an extension to the provisions in clauses 1 and 2, which provide extra flexibility in the way in which employers can recover primary national insurance paid on behalf of their employees on securities-based earnings. It may help if I explain briefly to hon. Members why we have detailed rules governing the way in which employers meet their national insurance liabilities. That framework exists to achieve three broad aims: first, to provide fairness to employees; secondly, to create administrative simplicity for employers; and, finally, to protect the income of the national insurance fund, which, as hon. Members know, provides the funds for state pensions and other contributory benefits and pays towards the national health service.

The Government's first duty is to protect the employee. It is important to have a clear set of rules to prevent the employer from making unreasonable deductions from an employee's earnings, which could result in the employee facing economic hardship—a matter that we discussed in Committee. For example, if there were no rules about recovery, an employer could make a mistake and under-deduct from the monthly earnings and then make good his mistake by recovering the whole of the under-deduction in one go, leaving the employee with no cash earnings for that month.

Pursuing that principle, I do not think it reasonable to amend the rules governing the recovery of primary national insurance contributions to allow recovery from all employees—not just ex-employees—in the following year, whatever the form of earnings, as the institute requested. However, to pick up the hon. Gentleman's point about the Government's view, if I do not agree with the proposals now, I accept that in some specific circumstances, the normal recovery framework may present employers with difficulties. We are keen to invite employers and their representatives to provide examples of particular issues that are creating difficulty. I am aware that new financial products are continually being developed. As with previous legislation, the Bill has been drafted to provide the flexibility to deal with those changes, when we agree with those who make the representations that it would be appropriate to do so.

Many changes could be dealt with by regulations. Again, we discussed that in Committee. For example, the recovery period for specific types of earnings could be extended in that way. So we have responded to specific difficulties, and we would seek to do so in the future. The hon. Gentleman is well aware that last year, we introduced regulations extending recovery time where payments of earnings are made by intermediaries or in the form of shares. We are planning regulatory changes before April 2004, when payments are made to workers seconded abroad and the primary national insurance liability is allowed to be paid later than at the end of the tax year, and where an employer has made an error in good faith and under-deducted the primary national insurance that is due.

Obviously, I cannot guarantee that we will always agree with the points made in representations in future. The Government do not wish to encourage employers to seek ways to pay earnings that are designed simply to reduce tax or national insurance liability, and have no further commercial value. For example, the Institute of Chartered Accountants also requested that the changes that the Bill and its regulations will make to the recovery rules for securities-based earnings should be extended to all non-monetary earnings. However, unlike shares, earnings paid in other non-monetary forms do not necessarily provide employees with a real stake in the company that they work for and are not therefore a form of earnings the Government want to encourage through special provisions.

I am trying to strike the correct balance, and to recognise that changes could be made to the future nature of those encouragements that would provide a stake in a company, that representations should be made and that the flexibility in the regulations will allow us to respond—but all that is underpinned by the crucial point that the stake in the company has to be an encouragement to the employee, and not intended to reduce tax or national insurance payments.

Mr. Mark Prisk (Hertford and Stortford) (Con)

The Paymaster General anticipates me in looking into parts of the representation, and it is excellent that we are getting those on to the record, but may I draw her back to our discussion in Committee, where we considered the definition of non-monetary earnings in clauses 1 and 2? That definition obviously goes wider than security-based earnings. She has responded to the first part of the institute's representation, but will she respond to its comment that, notwithstanding her earlier comments, it would be simpler for businesses if there were one rule for all situations concerning all non-monetary earnings?

Dawn Primarolo

I have tried to explain that, unlike shares, earnings paid in other non-monetary forms do not necessarily provide employees with a real stake in the company that they work for and are not therefore a form of earnings that the Government want to encourage through special provisions, because of the dangers—this does occur—of payments being designed to reduce tax and national insurance liability. Of course, the national insurance fund, and therefore all of us, would lose out in those circumstances.

I am trying to steer a delicate path through recognising a possible change in environment and putting in place a method to respond by regulation, while explaining clearly that we will need to judge whether the forms of payment provide employees with a real stake. Therefore, a general sweep through all non-monetary forms of reward would be a step too far.

It may help the House if I move on to the series of points that the Institute of Chartered Accountants made on clauses 3 and 4. It also wanted us to go further in those clauses, which extend provisions for joint elections and agreements to transfer secondary national insurance liability to employees when gains arise on restricted and convertible shares. It asked for the measure to be extended to other forms of securities-based earnings, such as restricted stock units.

The Government argue that the tax and national insurance treatment of earnings from restricted stock units will depend on the nature of the award. In some cases, therefore, such earnings might already fall within the scope of the legislation and thus allow the transfer of employers' class 1 national insurance to the employee. In others cases, that would not be appropriate because there is no unpredictable liability—that is the test—which is what the measure is designed to address. I am trying to respond by recognising that if something is not in the Bill, it does not satisfy the unpredictable liability test.

Secondly, the institute wanted the clauses to extend to national insurance liabilities that arise on the discharge of an amount treated as a notional loan, which is a form of earnings that arises when someone who is not ordinarily resident is granted an employment-related share option. As the hon. Members for Hertford and Stortford and for North Norfolk are probably aware, officials in the Treasury and Inland Revenue are currently conducting an extensive review of the tax rules surrounding residence and domicile. They are aware of, and are continuing to examine, problems with securities-based payments for internationally mobile workers, and they will examine that issue as part of the review. I think that that is a more appropriate way to consider such issues, because of the difficulty of the challenges.

Mr. Prisk

Will the Paymaster General confirm, therefore, that it is the intention of the Treasury. and the Government in general, to have as broad an input from business and industry as possible in that review? The professional impact of the measures will have a significant impact on the mobility of workers, which is a crucial part of this country's competitiveness.

Dawn Primarolo

I confirm to the hon. Gentleman that such a broad view and access to wider consultation are at the heart of the consideration of residence and domicile. It is important for the system to be fair and for the rules to be clear. The system should not undermine our competitiveness, yet we must ensure that the rules of the United Kingdom are not used in ways that would be detrimental to the vast majority of taxpayers in this country. The regulations can deal with such points.

I have outlined the principles underpinning how we would assess representations about suggestions made by the Institute of Chartered Accountants. We would welcome it if employers or their representative groups contacted the Inland Revenue if they had specific difficulties that arose from the Bill. The overall support for the Bill demonstrates that the Inland Revenue is working well with employers' representatives and others to identify real areas of concern and find sensible ways of addressing them, while keeping the rules clear, easy to operate and fair to all taxpayers.

On Second Reading, my hon. Friend the Member for Dumbarton (Mr. McFall) referred to working with business representatives, which relates to the point recently made by the hon. Member for Hertford and Stortford. That is relevant not only to the Bill, but, frankly, throughout the Inland Revenue's areas of interest. I shall again spell out the routes available. On employer-related matters, the Inland Revenue meets representatives from the Federation of Small Businesses, the Institute of Directors, the Confederation of British Industry and payroll practitioners, among others. That umbrella group provides a forum for the discussion of, and consultation on, policy changes and their operational impact on the taxation of employment income and related matters that might impact directly or indirectly on employers. It acts as a confidential sounding board for proposed policy initiatives and as an avenue for the discussion of representatives' concerns and proposals for change. That clearly provides a route through which discussions on the Bill may be taken forward, should they be required after it has become operational.

The Inland Revenue has an excellent working relationship with many share scheme interest groups, such as ProShare and the share scheme lawyers group. There are regular discussions between the Inland Revenue and groups interested in the promotion of employee share ownership, to ensure that concerns about the administration and technical interpretation of share scheme legislation are brought to the Government's attention. Regular dialogue not only allows areas of difficulty to be properly understood, but helps officials to develop clear and helpful guidance about the operation of share scheme legislation. When it came to putting together the measures in the Bill, the Inland Revenue was already in a good position to understand what employers wanted. Every measure was drawn up with an eye to representations or other forms of consultation.

Mr. John McFall (Dumbarton) (Lab/Co-op)

I thank the Paymaster General for referring to a point that I made on Second Reading. She will know that income tax officials have come to the Treasury Sub-Committee to help with our inquiry on the administrative cost of tax compliance. I must say, in support of what she is saying, that they have acquitted themselves well. Lessons have been learned from the past and officials are communicating with business. Given the criticism that they have received in the past, it is only fair to put that on record.

Dawn Primarolo

I thank my hon. Friend for his generous comments. Everyone in the House understands that we require tax inspectors and tax officials to pursue a dual role on behalf not only of the House, but of all our communities. We require them to operate a tax system that is fair to all and ensures that everyone pays their rightful amount, and to design and develop a tax system in consultation with all interested parties so that employers and employees can understand legislation, and so that it is operational. The delivery of that set of principles is difficult, but the Inland Revenue acquits itself extremely well.

I have said that the Bill was not contentious. No amendments were tabled, and there was broad support both inside and outside the House for the measures that it contains. However, that is not to say our debates in the House and Committee were without rigour. Indeed, the discussion of the clauses in Committee entailed a thorough scrutiny of their details, and relevant details that are to be set out in the regulations. I pay tribute to the hon. Members for North Norfolk and for Hertford and Stortford for the positive way in which they conducted their discussions in Committee to ensure not only that the Bill received proper scrutiny, but that the record showed clear indications about how the Government wish to proceed.

I am pleased to be able to conclude that the Bill has received thorough scrutiny, both in the House and as a result of extensive preparation with interested parties outside. As I said, I have been helped greatly by constructive contributions from Members of all parties who were involved in discussions on the Bill, for which I thank them. Finally. I reiterate that the purpose of the Bill is to fulfil our commitment that the Inland Revenue will work with employers' representatives and others to reduce technical differences in the administration of tax and national insurance. It extends employers' options for meeting their national insurance liabilities when paying earnings in the form of shares or other securities. It also helps to protect employees' rights to statutory sick and maternity pay by improving measures to tackle the very few employers who fail to meet their obligations. It is a technical Bill, but a useful one, and I commend it to the House.

1.30 pm
Mr. Prisk

I thank the Paymaster General for her opening remarks, particularly her detailed and thorough exposition of the submission by the Institute of Chartered Accountants in England and Wales.

As the Paymaster General said, the Bill is a technical measure, and is therefore complex both in form and purpose. I suspect, however, that on this occasion that is not the reason why we do not have the full attention of the House. The Paymaster General, other hon. Members and I are performing what may best be described as the parliamentary equivalent of an intermission. We may be unwatched and unseen, but nevertheless we are providing a convenient filling-in moment between two exciting instalments of a political drama. Normal service will be resumed as soon as possible.

The Bill and the measures that it contains are important because they affect both employers and employees, and a number of clauses are directly relevant to people's working situation. For example, clauses 1 to 4 will help to remove a potential barrier to widening share ownership. Some people may say that other aspects of the Bill are inconsequential. For example, clauses 5 and 6 apply to only about 4 per cent. of the national insurance fund, and some people will argue that that is of little consequence. That may be true, but for tens of thousands of self-employed people it represents 100 per cent. of their contributions. Given the fact that the self-employed are usually treated poorly by the Government, the change deserves our attention and, on this occasion, our support.

Following our various debates on the Bill, it is clear that it consists of two distinct parts. First, it seeks to amend the way in which employers administer national insurance contributions for securities-based earnings. We have touched on the question of non-monetary earnings and how broad that definition is, but the Bill deals specifically with securities-based earnings. That follows the Chancellor's ill-considered decision to impose an additional 1 per cent. on employees' primary contributions over the upper earnings limit. The second part of the Bill, as we learned in Committee, is intended to align the administration of statutory payments for maternity and sickness pay with that for national insurance contributions. The changes seek to tidy up previous incomplete legislation dating back, in some cases, more than five years. The two principal features of the Bill therefore arise from past errors and oversights by the Government. It is a refreshing change for the Government to accept their past failings. On behalf of Her Majesty's loyal Opposition, I have no hesitation in welcoming that admission of failure and the improvements introduced by the legislation. I only hope that that governmental contrition will set the tone for rest of the day, although I suspect that we shall be disappointed.

My party has, throughout the passage of the Bill, sought to provide constructive scrutiny. Where we have differences with the Government we shall express them, and I am sure that the Paymaster General will understand that I shall continue to do so firmly and persistently. However, in this case the measure is corrective and largely beneficial, so we shall not oppose it for the sake of partisanship. However, our ability to fulfil our important parliamentary role has been hampered by the fact that the regulations underpinning much of the Bill were not made available to the House until the morning of the day on which the Committee sat. For the benefit of Members who did not serve on the Committee, the regulations are extensive. They are 22 pages long—five pages longer than the Bill itself—and affect six of the 10 principal clauses. Following the Minister's promise that the draft orders would be ready in time for the Committee stage, I accept that there was an administrative error by officials, which resulted in the draft orders arriving on the day of the Committee's deliberations. Indeed, I received my copy as I arrived at Standing Committee D. I accept that the Paymaster General intended to try to get the orders to us, and I know that she will share my disappointment at the error that resulted in their delay.

I should like to challenge something else that has arisen in our debates, particularly in Committee. Significant measures in the Bill will be brought into effect based on details in the 22 pages of statutory instruments. The Bill is a framework, and it lacks detail about the exact way in which the rules will operate. The Paymaster General commented in response to an intervention that, as the Bill was a technical measure, the omission of the details was less important. In fact, the reverse is true. In a technical Bill, the detail is the most important part of the legislation. The broad policy is not in question—it is the practicalities and minutiae that matter. I suspect that most hon. Members would share that view and I hope that on reflection so will the Minister.

We have learned much during the passage of the Bill. It has emerged, for example, that the roots of the changes set out in clauses 5 and 6 go back as far as the 1998 Budget and the accompanying Taylor report. Indeed, the Government denounced the dual systems of income tax and national insurance as unduly onerous for the 1 million or so employers who had to operate them simultaneously. On 8 February 1999, the then Secretary of State for Social Security, the right hon. Member for Edinburgh, Central (Mr. Darling), spoke of the two sets of rules and the two Departments with which businesses had to deal and concluded that the case for change was "overwhelming". Nearly five years later, the Government are seeking to complete the task. I fully accept that it took up to two years for the original changes to bed down, systems to be established and training to be completed. However, a delay of five years is deeply disappointing. I know that the wheels of Whitehall grind slow, but to take five years is to progress at less than a snail's pace.

In Committee and on Second Reading, I raised the many concerns of business and professionals about the poor administration of national insurance. The Paymaster General, true to form, rose to the challenge and proudly declared that things were improving. If that is the case, that is welcome. However, she did not answer my basic question, although I trust that she will in reply to this debate. Are the standards of performance better now than they were before the merger, as promised by the Chancellor? I am not asking whether they are better than they were in 2002, when the Institute of Chartered Accountants complained, but better than the pre-merger performance. That was the promise made by the Chancellor—has it been kept?

During our deliberations, we learned of the unintended impact of the Chancellor's decision to impose an additional 1 per cent. of the national insurance charge on employees' earnings over the upper earnings limit. When an employer makes a securities- based payment of earnings, there is no national insurance liability until those payments are realised—for example, when options are exercised to acquire shares. At that point, the employer is liable to pay both primary and secondary national insurance contributions due on the employee's gain. Until 5 April last year, most employees would already have paid their contributions up to the upper earnings limit through the usual PAYE system. However, from 6 April 2003, there has been an additional 1 per cent. due on earnings that exceed that limit, so employers now face serious difficulties in recovering those additional primary contributions payable by employees.

As the Paymaster General mentioned today and in Committee, the Bill is designed to enable employers to recover those contributions through new agreements or through joint elections. We touched on the suggestion that these might be amended in the future, subject to the comments from the Institute of Chartered Accountants. The decision to enable employers to recover these contributions is generally welcomed by employers and outside organisations.

Our debates have also revealed a welcome Damascene conversion by the Labour party on share ownership. Gone are the old days of Bennite adherence to state ownership. Instead, we have the Blairite passion for share ownership. We will have to see whether that survives any future leadership change. The amendments in clauses 1 to 4 will remove a potentially serious barrier to employee share ownership. Now, promoting wider share ownership is a Conservative value. Indeed, more employees bought and owned shares under the last Conservative Government than ever before. That is why we on the Opposition Benches welcome the correction, as do those in business—including ProShare, the independent organisation whose purpose is to widen share ownership.

The Bill seeks to correct the omissions and errors of the Government's previous actions. As such, and rare as that is, it is to be welcomed. During our debates we heard of the five-year failure to align correctly the administration of national insurance contributions and statutory payments, and the burden that that delay has placed in particular on the self-employed. We have learned about the worsening administrative burden since the Government legislated in 1999, despite the Chancellor's original promises. We have heard how the decision by the Chancellor to increase employees' primary contributions over the upper earnings limit has had serious unintended consequences for promoting wider share ownership, which are corrected in the Bill.

Consideration of the Bill, although constrained by the absence of the details in secondary form, has nevertheless been constructive and purposeful. Given the benefit of the various measures that the Bill seeks to implement, I can confirm that it has our support and that it is not our intention to oppose it in the Lobbies at the end of the debate.

1.43 pm
Norman Lamb (North Norfolk) (LD)

As the hon. Member for Hertford and Stortford (Mr. Prisk) suggested, this event is akin to an intermission. I suspect the full Public Gallery has little to do with our current consideration of this exciting Bill. It is surprising that the public are not out getting their ice creams.

As has been observed, the Bill is technical and uncontroversial. I congratulate the Paymaster General on keeping going and speaking about it for the third time for the best part of half an hour—a remarkable achievement. I thank her also for the way she has conducted herself during our deliberations on Second Reading, in Committee and on Report. In her speech she dealt with the one representation received, from the Institute of Chartered Accountants. Never before, I imagine, has one submission from a professional organisation received such detailed consideration by a Minister on the Floor of the House. Her constructive comments and response to those points were welcome.

On Second Reading there was one Back-Bench speech and a few valiant interventions from a Labour Member—the hon. Member for Wolverhampton, South-West (Rob Marris). In Committee, as we heard, no amendments were tabled by the Conservatives, the Liberal Democrats or the Government, and it was all over in one and a half sittings. There is little of substance to add today. In a moment, I shall mention one or two questions I have on the draft regulations.

To summarise, the Bill is largely a tidying-up measure that increases the ease with which employers and employees can deal with national insurance. First, for instance, it makes it easier for employers to recover national insurance contributions by agreement from employees and ex-employees in respect of securities-based earnings. Secondly, it allows employers and employees by agreement to transfer the liability for employers' national insurance to the employee in respect of restricted and convertible shares, extending the facility that is already available in respect of earnings from share options.

We accept that that reduces a current disincentive to employers, who may be put off rewarding employees in this way because of uncertainty about the extent of national insurance liability when what is known as a post-acquisition chargeable event occurs. The employer cannot predict what the share value will be and therefore what the national insurance liability will be. To remove that unpredictability seems entirely sensible. Like the hon. Member for Hertford and Stortford, we support the idea of improving and increasing employee share ownership.

The Bill deals with a number of miscellaneous issues, aligning periods of notice required for distraint action between tax and national insurance. It unifies powers with regard to tax and national insurance and to the gathering of information for tax and national insurance purposes, and it removes overbearing powers in relation to national insurance. That is to be welcomed. Finally, the Bill removes criminal penalties with regard to non-compliance for statutory sick pay and statutory maternity pay, with the introduction of civil penalties. The Government clearly recognise that criminal penalties are wholly disproportionate to the compliance risk. On the draft secondary legislation, the point was made on Second Reading that measures in the Bill were overdue. In part, those measures result from a consultation process that was completed two and a half years ago. Two and a half years of deliberation later, the Bill emerged, but it depends substantially on secondary legislation to implement the detail. It is bizarre that a Bill can be introduced without the accompanying regulations that were produced at the same time, and that the Bill can reach Committee stage without members of the Committee having had sight of the draft regulations. That is not the best way to scrutinise legislation, and the Government must ensure that draft regulations are available before the Standing Committee considers such a Bill in detail.

Since then, I have been through the draft regulations. I assume that that is the sum total of draft regulations; I should be grateful if the Minister confirmed that. Can she also confirm the time scale for implementation? In the draft Social Security Contributions (Amendment) Regulations—the first set of drift regulations— paragraph 2(2)(a) refers to "non-monetary earnings". However, paragraph 2(2)(b) refers instead to "relevant securities-based earnings". That relates to former employees. Is there a reason for the different terminology, or does the drafting need to be reviewed?

In the same regulation there is an obligation on the employer to account to the employee or former employee for the proceeds of sale of the securities that were not required to discharge the liability for national insurance—in other words, if there is an amount over and above that required for discharging liability, it needs to go back to the employee. Should there be an additional obligation to provide a statement to the employee confirming the sale proceeds and how much of it was required to discharge national insurance liability? That may have been covered elsewhere already, but I would again be grateful if the Paymaster General dealt with it.

Reference is made to the fact that the draft regulations impose no extra cost on business, but the proposed regulations relating to Northern Ireland would impose a cost in limited circumstances. That is entirely justifiable, but should not the explanatory notes make it clear? Further, is any regulatory impact assessment anticipated with regard to those regulations, or is the Paymaster General relying on the regulatory impact assessment that accompanied the Bill? I am not sure what the guidance on regulatory impact assessments says about that.

I want briefly to mention the proposed statutory sick pay and statutory maternity pay regulations. The explanatory notes say that no regulatory impact assessment has been prepared because the regulations do not impose any new costs on business, but the civil penalties may impose new costs, so is it accurate to say that no costs will be incurred? Will the Paymaster General deal with that?

There is also a statement that the draft Social Security Contributions (Amendment) Regulations, which deal with elections in relation to restricted and convertible shares, do not in themselves impose any new costs on business, but there are costs associated with the regulations. There is provision, for example, for the transfer of cost from the employer to the employee with regard to secondary class 1 contributions. The regulatory impact assessment refers to the cost of£3,000 in respect of professional advice on preparing a form of election and obtaining Inland Revenue approval. Will the Paymaster General deal with that? Surely it is right that the explanatory notes to the regulations should be clear.

Those are specific concerns about the draft regulations. I would be grateful if the Paymaster General dealt with them, either now or in a letter. These are important matters with regard to the detail of the regulations, but I can confirm that the Liberal Democrats support the thrust of the Bill.

1.52 pm
Dawn Primarolo

With the leave of the House, I should respond, perhaps briefly, to this afternoon's debate and the points raised by hon. Members. I sense that the House is gearing up to move on to other business, or perhaps those Members who were watching the monitor in their offices suddenly developed an undying interest in the Bill.

As I said in opening the debate, the Bill reduces the technical differences between the administration of tax and national insurance. It makes important improvements in the system and helps to protect employees' rights. We had a useful if not brief—[Interruption.]

Madam Deputy Speaker

Order. Will Members who have recently come into the Chamber please have some respect for the Paymaster General, who is on her feet concluding the debate?

Dawn Primarolo

The hon. Member for Hertford and Stortford (Mr. Prisk) referred to an intermission. When I was a child, the intermission was taken up by fish swimming around on television, which shows how old I am. I have a feeling that this intermission is quickly coming to an end.

This afternoon's debate has ensured that all Members and both sides of the House have agreed that we have undertaken detailed scrutiny of the measures before us. I hope that I have made it clear that we have been willing to respond to representations made to us. I should say to the Institute of Chartered Accountants that I was replying to its representation out of courtesy, as it was the only one we received. I sincerely hope, however, that hon. Members will accept that I am not setting a precedent here. None the less, everyone accepts that the main principles in the Bill are correct and recognises the importance of what we propose. A number of specific points have been made.

Ann McKechin (Glasgow, Maryhill) (Lab)

Does my right hon. Friend share my concern over the former penalty for failure to pay statutory sick pay and statutory maternity pay, which involved a criminal sanction and which had not been used for many years? Can she confirm that the new civil measures will be used to impose appropriate sanctions, particularly given that the Equal Opportunities Commission has already started a major investigation into discrimination at work involving women in the workplace?

Dawn Primarolo

I regret that my hon. Friend was unable to join in this afternoon's debate, but I can confirm that, in moving from the old procedures under the social security legislation, the Government are seeking to—[Interruption.]

Madam Deputy Speaker

Order. May I once again ask all hon. Members to reduce the level of conversation while the Paymaster General is responding to the debate?

Dawn Primarolo

Thank you, Madam Deputy Speaker.

The procedures for civil action against employers are proportionate to the small number who seek not to fulfil their obligations under the legislation—[HON.MEMBERS: "Hear, hear."] Substantial penalties, none the less, can be imposed, although I am not sure whether my hon. Friends were cheering that. The point is to remove inappropriate criminal penalties that have not been working successfully and, by the use of civil penalties, to try to ensure that all employers comply with the legislation from the start.

The hon. Member for Hertford and Stortford (Mr. Prisk) again made a point about why things have taken so long. In the year since transfer, a great deal has been done to align the rules on tax and national insurance. Much has been achieved. The Revenue now operates joint employer compliance reviews covering tax and national insurance; new teams have been introduced for the joint handling of expatriates' tax and national insurance affairs; and we have made changes to regulations—for example, to align the national insurance treatment of foreign travel and foreign travel expenses for overseas employees with that of tax.

The Bill brings those changes together. That required primary legislation. As the hon. Gentleman knows, all Governments have to prioritise the measures that go into their legislative programme. We have been able to deliver those legislative changes at this point.

The hon. Gentleman and the hon. Member for North Norfolk (Norman Lamb)—[Interruption.]

Madam Deputy Speaker

Order. Once again, may I make a plea to hon. Members to reduce the level of conversation in the Chamber while the Paymaster General is replying to an important debate?

Dawn Primarolo

The hon. Members for Hertford and Stortford and for North Norfolk raised various queries about the regulations. If the hon. Member for Hertford and Stortford looks again at the regulations, he will see that four sets regarding statutory payment inspection powers are identical, as is required to cover the various jurisdictions. The hon. Member for North Norfolk—

Hon. Members: Hear, hear.

Madam Deputy Speaker

Order.

Dawn Primarolo

I sense that the House would like me to conclude. Therefore, I say to the hon. Member for North Norfolk that I will reply in writing on the points that he has raised about the regulations and ensure that the letter is placed in the Library—those Members who are interested will be able to scrutinise it.

The Bill takes forward the Government's commitments. It makes useful improvements to the administration of national insurance contributions; takes forward the Chancellor's commitment that the Inland Revenue would work with employers' representatives and others on reducing technical differences between the administration of tax and national insurance; builds on the Government's work to promote productivity by encouraging employers to give their employees a financial stake in the company through extending employers' options for meeting national insurance liabilities when paying earnings in the form of shares; and helps to protect employees' rights to statutory sick and maternity pay by improving and tackling employers who fail to meet their obligations.

Clauses 1 and 2 give employers flexibility as to how they recoup employee national insurance liability when employers must pay that liability on behalf of their employees. Clauses 3 and 4 extend the range of securities-based earnings for which employers and employees can agree to transfer unpredictable employer national insurance liability to employees. On both those measures, the Bill contributes to the Government's drive to increase employee share ownership by removing disincentives. Clauses 5 and 6 align the procedures for the collection of national insurance debt owed by the self-employed with those on tax. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read the Third time, and passed.