HL Deb 23 March 1978 vol 389 cc1941-5

12.12 p.m.

Lord WELLS-PESTELL rose to move, That the draft Social Security (Contributions) Consequential Amendment Regulations 1978, laid before the House on 9th March, be approved. The noble Lord said: My Lords, the regulations make further arrangements, such as have been made annually in earlier years, for the calculation of mariners' primary and secondary Class 1 contributions consequent upon the changes, from 6th April 1978, in the percentage rates and earnings limits for contributions.

To avoid the need for separate regulations each year it is intended to put in a permanent form the basis on which a mariner's earnings should be taken into account for National Insurance contributions purposes. That is, where the earnings were in respect of a voyage period which fell in more than one income tax year and where there had been changes in rates and earnings limits for contributions during that period. Draft regulations to achieve this have recently been considered by the National Insurance Advisory Committee, but their report is awaited. There is no prospect of these regulations—which are subject to Affirmative Resolution in both Houses—completing the necessary Parliamentary processes in time to operate from 6th April 1978.

As it is essential that regulations to take account of changes in rates and earnings limits which come into force from 6th April 1978 should be made to come into operation on that date these further regulations have been laid. But as I pointed out a moment or two ago, it is intended to introduce an order which will make this unnecessary each year. In the past it has not been necessary to trouble the House with such regulations as they were wholly consequential on the Contributions Re-Rating Order, and accordingly subject to Negative Resolution procedure. This year, however, the regulations are made partly in consequence of the Re-Rating Order and partly in consequence of regulations under the Social Security Pensions Act prescribing the earnings limits and, therefore, are not exempted from the Affirmative Resolution procedure. Subject to the later approval of Parliament, it is now intended that the permanent regulation should come into operation on 6th April 1979 and thereafter there will be no further need for separate regulations each year.

I now come to the detail of the regulations which I can, I think, take shortly. Regulation 1 provides that the regulations shall commence operation on 6th April 1978. Regulation 2 inserts into the principal regulations an interpretation of the term "The Re-Rating (No. 2) Order 1977" used in the draft regulations. Regulation 3 makes the last made separate regulation—that is, 88B of the principal regulations—subject to the new regulation. Regulation 4—the new regulation—continues the general pattern of special regulations which have been made each year for the calculation of mariners' contributions. It is required because the mariners to whom it relates, normally receive a settlement of earnings at the end of the voyage. The voyage may fall in more than one tax year, with the result that in the absence of special provisions the mariners' earnings would attract contributions at the rate existing at the end of the voyage rather than at the rates, and subject to the limits, appropriate to the periods of the earnings. As your Lordships know, contribution rates and earnings limits, which affect the amount of contributions, often vary from year to year.

This regulation has the general effect that where a voyage period spans 6th April 1978 the mariner's earnings are subdivided and contributions are calculated separately on the basis of the contribution rates and earnings limits applicable in the year prior to, and that commencing on, that date. Earnings are not, however, taxed specially in this way under the regulation where the part of a voyage period which falls in one tax year is no more than a month in duration.

If I may, I shall explain this a little further by saying that should a voyage commence on or after 6th March 1978 and continue beyond 5th April 1978, the earnings and the period of time in the first tax year of the voyage shall be added to those in the second tax year of the voyage, and contributions shall be calculated by reference to the total of the amounts earned during those two periods, the total length of the two periods and the rate and limits applying during that second tax year.

Alternatively, should a voyage commence before 6th March 1978, continue beyond 5th April 1978 but end before 6th May 1978, the earnings and the period of time in the last tax year of the voyage shall be added to those in the penultimate tax year of the voyage and the contribu- tions shall be calculated by reference to the total of the amounts earned during those two periods, the total length of the two periods and the rate and limits applying during the penultimate year. I know that this sounds extremely complicated and I do not think that I am in danger of over-simplifying it when I merely say that a good many mariners are at sea for a considerable period. They can be away for some months in the present tax year and then still be away on the same voyage for several months in the tax year which will begin on 6th April 1978.

The rates of contributions in both those years are different. We know the contributions are going up after 6th April. The earnings limits are going up, and it would be unfair to ask them to pay National Insurance contributions in the year when they are higher than they were in the previous year. Briefly, it means that they are being assessed for each period of the years in which they have been away. These special arrangements have been made for the industry for many years and are fair to the employers as well as the employees, and it can be done in such a way that it does not create undue administrative difficulties for the employer. I hope that that explanation is reasonably clear, and I beg to move.

Moved, That the draft Social Security (Contributions) Consequential Amendment Regulations 1978, laid before the House on 9th March, be approved.—(Lord Wells-Pestell.)

12.21 p.m.

Lord SANDYS

My Lords, the House will be grateful to the noble Lord, Lord Wells-Pestell, for explaining this particular order. One realises in listening to the noble Lord how complicated this situation is. I was interested to hear that the report of the National Insurance Advisory Committee is still awaited. Naturally this will very much concern the situation with which we are confronted. In regard to Regulation 4, on which the noble Lord dwelt at some length, it appears from listening to the noble Lord that, although contributions will be re-rated satisfactorily so far as the mariner is concerned, there may indeed be a tax disadvantage to the mariner because of the grossing up of earnings for a rather longer period. However, as we are awaiting the National Insurance Advisory Committee's report, I shall not comment further.

Lord BANKS

My Lords, once again we are indebted to the noble Lord for a clear explanation of what is, in essence, a simple proposition that is nevertheless complicated in operation. The noble Lord has made it clear that this is a proposal to cover the position where a voyage takes place in more than one year—spans the division between two fiscal years. It is, as he said, an interim provision until a permanent provision is introduced, it is hoped, next year. When the permanent provision comes, will it be by a Negative Resolution or an Affirmative Resolution? Is it just because of the peculiar situation this year that we have an Affirmative Resolution? I do not wish to question the precise proposals which the noble Lord has explained. We certainly are happy to support the approval of the order.

Lord WELLS-PESTELL

My Lords, I am grateful to both noble Lords for what they have said. I believe that the tax does not present a problem. I think many of us have been in a position whereby we have been in receipt of monies in the middle of the year which has covered five months in one year and five or six months in the previous year. Speaking personally in this matter, I have never felt that I have been at a disadvantage, because it has been possible to make adjustments.

With regard to Lord Banks's point, I understand that it will be an Affirmative Resolution.

On Question, Motion agreed to.