HL Deb 25 June 1991 vol 530 cc494-510

3.28 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Henley.)

Lord Tordoff

My Lords, before the House moves into Committee, perhaps I may point out that the Opposition Dispatch Box appears to be decorated with pale pink ribbon. Is that some kind of political statement or has someone given a present to the Opposition?

On Question, Motion agreed to.

House in Committee accordingly.


Clause 1 [Class 1A contributions]:

Lord Mottistone moved Amendment No. 1: Page 3, line 9, leave out ("18,000") and insert ("10,000").

The noble Lord said: I am advised on this amendment by the CBI which tells me that its members oppose the Government's proposals to impose liability on employers for national insurance contributions on company cars and fuel. In particular, the Bill will add over £400 million to employers' costs at a time of recession; it discourages the motor industry by unfairly penalising the company car; and it fails to distinguish between cars used as business tools and those given as perks.

The present banding system does not reflect the real boundaries between cars that are provided as a perk and those that are provided as tools of the trade. While the 2,500 mile threshold (mentioned in the paragraph immediately below the one to be amended by my amendment) is acceptable, the 18,000 mile threshold is far too high. The Government's figures, provided by a Ministry of Transport survey in 1975–76, suggest that the average business mileage is around 10,000 miles a year. That figure is supported by business from practical experience. It is for that reason that I seek to amend the Bill and replace the figure of 18,000 by 10,000 in the relevant subsection.

An 18,000 mile threshold is obviously inequitable. It will hit hardest those companies which are already suffering most in the recession. Examples are small companies and construction companies which will have sales and other personnel who need to visit sites and firms within inner cities and high density population areas and who therefore do not cover a high annual mileage.

I understand from the CBI that this has been a fairly long-standing battle with successive governments. From all my experience in industry and at present, it seems to me that 18,000 miles as a mark of a business journey is much too high and quite out of line with practical experience. No doubt there are some people who travel long distances in unpopulated areas but in this country they are the exception. Certainly it is not right to have such a high figure. I trust therefore that the Government will be extremely sympathetic and will agree to my amendment. I beg to move.

3.30 p.m.

Baroness Turner of Camden

I rise to support the amendment proposed by the noble Lord, Lord Mottistone. During the Second Reading of this Bill I made it clear that on these Benches we did not oppose what the Government intended in principle but that we had a number of points to raise. We were concerned that it would be very difficult—this point was made by the noble Lord, Lord Mottistone—to distinguish between people who had a car simply as a perk, as part payment, and people who needed to use a car in the course of their business. In particular I drew attention to people employed as sales representatives in an area such as London, where it would be difficult to assert that 18,000 miles a year represented a reasonable marker. It is possible to use one's car entirely for business in London and do very substantially less than 18,000 miles a year.

The point made by the noble Lord, Lord Mottistone, is valid. Ten thousand miles a year is the recommended figure and the CBI has already drawn attention to that figure as normal for business use. Therefore I hope that the Government will reconsider their attitude to this matter and will be prepared to make this small concession and accept the amendment.

Lord Banks

I too should like to support this amendment. I do so for the reasons that were put forward by the noble Lord, Lord Mottistone, and the noble Baroness, Lady Turner of Camden. I also mentioned this point in the course of my Second Reading speech. I thought that the figure of 18,000 was too high. I still adhere to that position and therefore support the amendment.

Lord Boyd-Carpenter

On Second Reading I ventured to suggest that the whole Bill would have an adverse effect on industrial costs at the very moment when it was necessary above all to keep costs down. This amendment would have the effect at least of reducing quite substantially the damage which the Bill otherwise would do. As the noble Baroness opposite said, there are many hard-working people who use their cars for work over the relatively short distances involved in, say, the Greater London area or other metropolitan areas in this country. After all, it is possible to travel quite short distances between a large number of customers or clients or people with whom one is concerned industrially and be unlikely to come anywhere near the figure of 18,000. That figure may not be reached unless one is operating mainly in the open country where distances between places are longer.

Therefore it seems to me that my noble friend has done a very good service not only to this Chamber but to the Government in proposing an amendment which will quite substantially reduce the damage which otherwise the Bill would do. I am sure that whatever views this Chamber normally takes about the opinions of the CBI, it is realised that on this kind of issue the CBI speaks with the authority of experience. I should certainly be most disappointed should my noble friend not be prepared to adopt a flexible and reasonable attitude on this amendment.

Lord Carter

There is a point arising from the remarks of the noble Lord who has just spoken regarding the costs of employers. The last time that there was an assessment of the National Insurance Fund, as the noble Lord will know, it was felt able to reduce employers' contributions from 10.45 per cent. to 10.4 per cent. at the higher rate—a reduction of 0.05 per cent.—and have a reduction of 0.4 per cent. on the lower rates. This Bill adds £610 million to the National Insurance Fund. In fact it reverses the action and takes back all the cut in employers' contributions. I ask the noble Lord when he replies to tell the Committee whether the previous assessment was wrong.

One should remember that that was all part of the deal on the Statutory Sick Pay Bill. I remind the noble Lord of what he said on the Second Reading of that Bill: Nevertheless, side by side with that package of SSP changes, the Government propose to make substantial reductions in employers' national insurance contributions liability. Although those reductions extend across the whole spectrum of national insurance contributions, they have been particularly weighted to help smaller employers".—[Official Report, 11/12/90; col. 392] What has changed?

Lord Henley

Perhaps I may deal first with the point raised by the noble Lord, Lord Carter. He knows perfectly well that my right honourable friend the Secretary of State has to consider the state of the fund each year. He looks at the outgoings and then has to consider at what levels national insurance contributions can be levied. As a result, at the time of the Statutory Sick Pay Bill my right honourable friend was able to make such a reduction. On this occasion, he is seeking for completely different reasons to increase the contributions made by employers because it is only fair and equitable that they should make contributions on benefits that are paid in kind rather than in cash. Therefore, when he next comes to review the state of the fund he will find that there might or might not be extra resources available to enable him to make changes to other levels. Obviously I cannot predict the outcome of his consideration. My right honourable friend has to consider each year the state of the fund and then fix contributions accordingly.

I understand perfectly well what lies behind my noble friend's amendment. I well understand the disquiet that has been expressed from all sides of the House. However, I believe that the amendment is based on a false premise. On page 2 of the Bill subsection (4) sets out the basic provision for charging Class 1A national insurance contributions on the cash equivalent of the benefit of the car to the earner. Paragraph (i) of subsection (6) (b)—which is the paragraph that my noble friend seeks to amend—deals only with special cases where the employer does not have the necessary information about business miles. In that case the benefit will be deemed to be chargeable at the higher rate.

I have to say that I am not sure of the effect that my noble friend's amendment would have. Certainly it will not have the effect that he desires; namely, to reduce by 50 per cent. the national insurance contributions chargeable on those who drive 10,000 business miles as opposed to the 18,000 miles proposed. If my noble friend wishes to do that he would have to seek amendment to the Income and Corporation Taxes Act 1988 which subsection (4) ties into. Nevertheless I understand the concerns that he has put forward. Although the amendment is totally and utterly defective and achieves nothing whatsoever so far as I can understand, I should deal with some of the anxieties that my noble friend mentioned.

It might help if I explain that the present system already gives special treatment to the heavy business user. Where business mileage is substantial—18,000 miles or more a year—the main scale charge is halved. Taken together with the 50 per cent. addition for cars with little or no business mileage, employers of very heavy business users pay one third of the charge faced by those whose company cars are used very little for business, i.e. the perk car, those below 2,500 business miles. Given the substantial average private mileage of cars which are heavily used for business, it is clear that this reduced charge is not an excessive measure of the value of the private use. For example, cars used for business mileage over 10,000 miles a year are frequently used also for large amounts of private mileage. Figures from the National Travel Survey, from which my noble friend quoted, show that employees in the middle band—2,500 to 18,000 business miles—average over 11,000 private miles a year. There is no evidence that this private usage reduces in any way where the business mileage moves into the highest band—18,000 miles or more.

I believe that that is sufficient reason for showing that the intention behind the amendment is inconsistent with the purpose of the Bill. I invite my noble friend to withdraw the amendment. Nevertheless, I appreciate that the amendment is defective in what it seeks to achieve. If he wished to make such amendment it should be to the Income and Corporation Taxes Act 1988. I hope that he will feel able to withdraw his amendment.

Lord Mottistone

I hold up, just—I am hardly strong enough—the Income and Corporation Taxes Act 1988. I am advised that it is the biggest Act that has passed through Parliament. By its nature I imagine that we did not have a hand in it. Perhaps we did not have a chance to consider it.

I appreciate what my noble friend said about my amendment not achieving what I set out to achieve. I am glad that he understands what it seeks to achieve. At a late stage of framing the amendment I was on the telephone to the CBI and its lawyers. They could not put the wording right because it is terribly difficult to amend the Act, let alone the Bill before us.

I take the points my noble friend has made. I hope to return with an amendment at the next stage of the Bill which achieves what I seek. However, at this stage it has been useful to have had the matter aired. I am grateful to Members of the Committee on all sides of the Chamber who supported the amendment. I am sure that they supported the principle even though the CBI and I recognise that the amendment as presently worded does not achieve what is required. I hope that at the next stage we shall bring forward a more perfect amendment.

It would have been even nicer if my noble friend, having understood the aims of the amendment, had said that he would bring forward a government amendment. That would have been even more helpful. It is a serious point. It might be important to have a Report stage in order for that to be achieved. I believe that it is being suggested that we shall go straight to Third Reading if none of the amendments is accepted by the Committee. Without a Report stage, if I were to put down an amendment at the next stage of the Bill, there would not be time for my noble friend, having considered my amendment, to bring forward an amendment of his own at Third Reading. Perhaps he can comment on that.

Lord Henley

I said that I understood what my noble friend sought to do; I gave no commitment that I supported it. I then set out why I thought the intentions behind the amendment were misguided. I am certainly not prepared to offer the help that he seeks.

Lord Mottistone

I do not suggest such help at this stage, but when we have put forward an amendment that is not faulty, perhaps my noble friend will have a different view.

I do not wish to prolong this debate or to offend the doggie people. However, let us not forget that we picked on 10,000 miles because that is what a government report in the mid-1970s stated as the average business mileage. I am sure that it will be roughly that figure. It might be 11,000 or 9,000, but we base the mileage on the Government's own figure. Although my noble friend may be against the amendment because of what one might call the money side of his job, from the point of view of keeping business going we must make fair provision. Having said that rather firmly—

Lord Boyd-Carpenter

Before my noble friend withdraws the amendment, with reference to a Report stage, I have been assured this morning by the authorities of the House that there will be a Report stage.

Lord Mottistone

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

3.45 p.m.

Lord Boyd-Carpenter moved Amendment No. 2: Page 3, leave out lines 26 to 30.

The noble Lord said: I understand that it will be for the convenience of the Committee if I speak also to Amendment No. 3 since it raises the same point. Like my noble friend, I am anxious not to cause the dogs to bark in vain for too long.

Both amendments deal with what appear to be Henry VIII clauses; that is, provisions in a statute under which that statute can be amended, not by another statute but simply by regulation or order made by Ministers. Members of the Committee will recall that we had considerable discussion on the matter on the Statutory Sick Pay Bill. I am sorry to see that the noble and learned Lord, Lord Simon of Glaisdale, is not in his place today because he is the acknowledged authority on a subject on which I am no more than a toiling amateur. I understand that these provisions are both measures of that kind.

At Second Reading, the noble Lord, Lord Henley, said that one had to have such provision because one could not otherwise adjust the current legislation to some forthcoming legislation. I pointed out that the forthcoming legislation could perfectly well be used to make the necessary adaptation in the ordinary way by way of statute. The only answer that my noble friend gave is one with which, frankly, I disagree. He stated in the Official Report of last Friday at col. 858 that one could not use a Finance Bill to amend a national insurance Bill. With respect, that is absolute nonsense. One could perfectly well put a provision in a Finance Bill for amending other statutes. All one has to do is to provide that the Title of the Bill is wide enough to permit that. If that is the only objection, with great respect to my noble friend, it is a wholly bogus one.

The proper, sensible and civilised way to deal with the matter would be to drop these provisions in the Bill and announce that whatever amendments are needed to bring the Bill into line with a future Bill which we have not yet seen will be contained in that future Bill.

Lord Renton

I had hoped and believed that I had added my name to these two amendments. But the piece of paper on which I did so, and which I put into the appropriate box in one of the offices, does not appear to have reached those who make such matters effective. However, I support my noble friend Lord Boyd-Carpenter in what he said, and add a very few words.

Henry VIII clauses are obviously prima facie undesirable. In my opinion the only time when it is justifiable to make changes in a statute by regulation is when the circumstances are changing, perhaps with inflation. The amounts then mentioned in the statute may have to be changed without troubling Parliament with re-laying a Bill and going through the whole palaver when it is obviously necessary that the change should be made to keep pace with inflation. That is clear enough and it is a point that one concedes.

However, as my noble friend has pointed out, that is not the circumstance which now exists. The proposed amendments are undesirable because they amend previous statutes which are in themselves most complicated. There will be no opportunity to amend the regulations. We must take them or leave them and hope that we have got it right when, by recourse to the Library, we see how the previous statutes which are so complicated have been amended. That is not a satisfactory way of amending legislation; nor is it a satisfactory use of regulations. Therefore I support the amendments tabled by my noble friend Lord Boyd-Carpenter.

Lord Elton

I join the discussion with hesitation. First, I do not like joining issue with two such senior legislators as my two noble friends. Secondly, I do not like to limit in any way the restriction of the use of what we have come to call Henry VIII clauses. However, my noble friend Lord Renton has said that there are circumstances in which such clauses may be justifiable. He gave an example of the change in economic circumstances which could clearly be indexed. That is another way of saying that the power should be useful when there is a limiting factor clear for all to see which operates upon it.

I regard a true Henry VIII clause to be one which gives the Secretary of State or other Minister the power to act regardless of outside circumstances. As regards the first amendment—that which I am addressing—the outside circumstances consist of precedent legislation. Not merely is there a circumstance controlling the Minister, but that circum stance is an expression of the will of Parliament, albeit the other place.

My noble friend Lord Boyd-Carpenter said that it would be possible to provide for this power to be exercised in an amendment to the Finance Bill in question—

Lord Boyd-Carpenter

My noble friend has misunderstood me. I did not say that it would allow for the power to be exercised; I said that any necessary amendment in this Bill could be effected in the Income and Corporation Taxes Act. That is an entirely different point.

Lord Elton

I am obliged to my noble friend but the consideration that I have in mind still applies. It is for the Minister to tell me whether I am right and it is for him to answer the point. I suspect that if one were to widen the Long Title of the Finance Bill to the extent of permitting this Bill to be altered, one would extend it to include almost every other statute on the statute book. I am glad to be reassured by the Minister that the urgent shaking of the heads of my two noble friends on the Treasury Bench below me is right. The only point that I wish to leave with the Committee is that this is an exercise in the use of what we have come to call Henry VIII clauses under limited circumstances, flowing from a conscious act of the other place.

Lord Cockfield

All I shall say is that there is a longstanding resolution of this Chamber relating to "tacking".

Lord Mottistone

An important point about the amendments is that during the past year I have detected that not only has business been faced with a recession but also with a lack of consultation. I remember that during our discussions on the Social Security Bill that issue was much to the fore as between the relevant department (that of the Minister) and the CBI. When business is under pressure it is not good for systems of legislation to be available which can preclude consultation with interested parties. I am against the kind of powers which my noble friend Lord Boyd-Carpenter seeks to erase from the Bill. Apart from the general principle of Henry VIII systems, I should object to providing a way in which departments can slip through measures without consultation. There is too much of a tendency to do that and I do not know why it exists. I do not know why the Department of Social Security believes that the fact that British business is under great strain does not matter and that the wealth of the country, upon which it depends for doing its job, is threatened. I do not know why the department takes that view but it appeals to have done so, at least for the past 12 months. It would be better if the department did not seek these extra powers in order to continue its unpleasant practices.

Lord Carter

The Committee will be familiar with the argument against Henry VIII clauses, but repetition does not reduce the cogency of the argument. Not only do we have government by regulation in the Bill but in Amendment No. 5 there is a de facto retrospection. We have seen a great many such provisions in recent Bills. The Statutory Sick Pay Bill was governed by a Henry VIII clause, although Members of the Committee improved the Bill in that respect, and the provision appeared in the Child Support Bill.

We on these Benches are pleased to support the amendment. We believe that the Government should come back and justify their policies. The fact that the power in Clause 1(7) is related to another Act is not sufficient reason to give the Government wide-ranging powers to amend legislation as they see fit.

Lord Henley

As my noble friend explained on Second Reading and has repeated today, the purpose of the two amendments is to remove from the Bill a provision which he contends enables the Government to amend provisions once they have been enacted by statutory instrument. The first question that we must address is: are they Henry VIII clauses? Secondly, if that is the case are they justified? As was pointed out by my noble friend Lord Elton, such clauses are justified on certain occasions and I intend to deal with that matter in time.

As regards the first question, I said on Second Reading that I did not accept that Clause 1(7) was a Henry VIII clause. On subsequent reflection I am now prepared to accept that in its widest possible definition it could be interpreted as such. Therefore I shall in time argue that it is a justifiable Henry VIII clause.

I do not accept that to be the case in respect of Clause 2(2), which is the subject of my noble friend's second amendment. The provision does not give power to amend primary legislation but merely to modify its effect in certain rare cases. If we accept that subsection (7) is a Henry VIII clause—albeit a very little Henry VIII clause —the second question is whether that is justifiable. For the interest and possibly the amusement of my noble friend I shall begin by citing a precedent from the National Insurance Act 1959 which was passed when he was Minister of Pensions and National Insurance. My noble friend will know that the Act gave the Minister powers to amend it by means of delegated executive powers. I refer to Section 1(2) which enabled my noble friend who was then Minister to amend the rates shown in that section by delegated powers.

Secondly, I wish to refer to the answer given by my noble and learned friend the Lord Chancellor on 19th March in reply to a question tabled by my noble friend Lord Renton. In that answer my noble and learned friend explained that the exercise of powers under secondary legislation to amend Acts of Parliament can on occasion be a useful means of effecting consequential amendments or repeals of an entirely subsidiary character without the need to require Parliament to consider yet further primary legislation. He confirmed that the Government would continue to propose such powers where they seemed appropriate.

I believe that we should have close regard to that important statement of policy by my noble and learned friend in discussing these amendments. The Government see no need to proscribe provisions of this sort in Bills. They can on occasion serve as a useful means of implementing consequential amendments without requiring Parliament to consider further primary legislation. Secondly, there is no general rule that such provisions should specify affirmative resolution. It is a matter of judgment as to whether there are more important matters for parliamentary attention.

On that basis, I believe that it was perfectly proper to make the provision that appears in the Bill at lines 26 to 30 on page 3. And, as I explained on Second Reading, the powers can only be exercised following an amendment to the Income and Corporation Taxes Act. Moreover, this is no blank cheque that the Secretary of State is being given: the content of any regulations is confined to matters which are necessary or expedient in consequence of any alteration to Sections 157 or 158 of the Income and Corporation Taxes Act 1988 or Schedule 6 to that Act.

It may help the Committee if I explain in more detail the circumstances in which we envisage using the power to make such regulations. We would not need to invoke the provision whenever the scale rates—the cash equivalents of the benefit of a car or fuel referred to earlier in Clause 1 of the Bill—are altered, as they may be each year as a result of the Budget. So if next year the scale rates for cars and fuel were altered from their present values, set out in Schedule 6 to the Income and Corporation Taxes Act 1988, the cross-references in our provisions would mean that they would refer to the amended provisions without further legislation. If, on the other hand, some amendment was made to Sections 157 and 158 of, or Schedule 6 to, the Income and Corporation Taxes Act 1988 which was not immediately capable of working in our provisions, then we would need to amend by regulation.

It is not easy to describe such circumstances because, of course, I am having to guess at possible future change. However, perhaps I may be rather more specific as to the circumstances in which we may need to make an amendment by regulation. One instance would relate to the mileage thresholds of 2,500 and 18,000 miles which are incorporated in the text of the Bill at subsection (6). If those figures were altered by the Income and Corporation Taxes Act, I am advised that because they are not cross-referenced, the Bill's provisions would need amendment so as to have similar effect. In such circumstances we would make regulations to amend the figures. That would be the extent of our secondary legislation. I hope that my noble friend will agree that it would be wholly disproportionate to require that that should be done by means of social security primary legislation or by means of widening the scope of any future Finance Bill so as to cover those points.

That was a point made by my noble friend Lord Elton when he asked whether the scope of the Bill could be widened. I am advised that if that was done, one would dramatically increase one's problems as regards the management of the Bill and that that would not be the right line to follow. I suggest that in those circumstances it would be a questionable use of Parliament's time to require it to consider a further set of consequential changes in primary legislation where the principle of the change has already received consideration in this Bill. I hope therefore that my noble friend will withdraw the amendment and not proceed with that being discussed with it: first, because the second amendment is not the Henry VIII clause which he thinks it is; and, secondly, because, even if the first amendment relates to a Henry VIII clause, in the circumstances of its use it would be justifiable.

4 p.m.

Lord Boyd-Carpenter

I am glad that the Minister has now acknowledged that which he refused to acknowledge on Second Reading; namely, that it would be perfectly possible to do what the Government want by embodying the provision in the subsequent legislation and that the only pity from the Government's point of view was that widening the scope of the legislation—and he delicately did not go further—would allow more amendments to be tabled which would be highly inconvenient for Ministers conducting the Bill.

I am glad also that the Minister acknowledges that the provision contained in subsection (7), dealt with by the first of the amendments, is in the colloquial sense a Henry VIII clause and that that is beyond dispute. As I understand his argument, it is much like the lady who produced an illegitimate child and argued that it did not matter because it was only a little one. That was my noble friend's line of argument.

Lord Henley

I believe that my noble friend is slightly unfair. I was arguing that although it may be argued that it is a Henry VIII clause, it is justifiable in the circumstances.

Lord Boyd-Carpenter

Yes, but my noble friend will recall, or Hansard will remind him if he does not recall it now, that he was arguing that it was small in scope. That is the point of the fairly light-hearted reference which I gave.

I cannot pretend that I find the position satisfactory. However, it is useful that the Committee has had the opportunity, which I hope it will always take, of challenging such clauses. I do not propose to delay the proceedings in connection with the little one by seeking to divide the Committee. A useful purpose has been served by discussing this matter and by making it clear to the Government that similar clauses will always be discussed. Having said that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Clause 2 [Computation, collection and recovery]:

[Amendment No. 3 not moved.]

Clause 2 agreed to.

Clauses 3 to 5 agreed to.

Clause 6 [Short title, commencement, financial provision and extent]:

Lord Boyd-Carpenter moved Amendment No. 4: Page 6, line 1, leave out ("Contributions") and insert ("Employers' Contributions").

The noble Lord said: This is an attempt to assist the Government by securing that the Title of the Bill reflects what the Bill does. That may seem a rather revolutionary view in certain circles. I am sure that the parliamentary draftsman would be horrified at the idea. Some of their recent work suggests that the contrary is often their intention.

The Bill imposes a contribution solely on employers. Therefore, it is quite distinct from the normal run of social security contributions Bills which impose liability both on employers and employed. It is more accurately described in the words of my amendment than it is in the Title of the Bill. One can search the Bill with great zeal before finding any direct benefit conferred by it on any person in the social security or national insurance systems. I beg to move.

Lord Henley

I do not accept what my noble friend says. I am amused that he believes that he is assisting the Government. Should my noble friend wish to refer to employers' contributions, it would not be appropriate to refer to them in the Title. The liability to pay Class 1 A contributions is on, persons is liable to pay the secondary Class 1 contributions or certain other persons". My noble friend accepts, I am sure, that that would make a rather long-winded Title and that it would be better to follow the precedents of social security contributions legislation of 1981 and 1982.

Lord Carter

I know that it is unlikely, but if the Government decided to make changes as regards employees' contributions in that respect, will it be possible, under the Bill as drafted, to do so by the regulations which we discussed on the last amendment?

Lord Henley

I am not aware that we could do that under the Bill as drafted. As I explained on Second Reading, we did not consider it right to include employees' contributions because about half the people who benefit from the use of company cars are above the upper earnings limit. The administrative details and the problems of levying the relatively small amounts of money on the others would not make it worth while.

Lord Carter

That is not the point. I was not referring to the justification but to the technicality. Would the Government be able to do it in the Bill by regulation?

Lord Henley

I am not aware that we could. The noble Lord will know that Class 1A contributions will be purely for the employer. I do not believe we could extend them by regulation to the employees.

Lord Boyd-Carpenter

I do not want to waste more time on this relatively unimportant matter. The Government may have good reasons for misdescribing their legislation in respect of this specific Bill. The less the Bill is understood by the country, perhaps the better for the Government. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Boyd-Carpenter moved Amendment No. 5: Page 6, line 13, leave out ("1991") and insert ("1992").

The noble Lord said: Amendment No. 5 concerns a more substantial matter and relates to the fact that, whether or not the Minister likes it, the additional charge being imposed by the Bill is retrospective in effect. As he quite properly pointed out at Second Reading, it demands payment at the end of the current financial year. However, the liability is being accumulated from the beginning of the financial year, which is two-and-a-half months ago. In doing that it is no defence to say, as my noble friend said several times at Second Reading, "It is in the Budget and the Budget applies to the year ahead".

First, with great respect, it was not in the Budget. It was announced in the Budget Speech and it was announced that there would be legislation to impose it. That does not put it in the Budget. The point made by my noble friend at column 859 appears to omit that, whereas Budget provisions come into force at once, they do so because of the Budget resolutions. On the day of the Budget, after the Chancellor of the Exchequer has sat down, resolutions are carried which put those tax changes into effect generally from six o'clock that afternoon. I believe that that is the normal procedure. On an occasion when tax on whisky was to be increased, I recall going into a bar at five minutes before six and as a result obtaining my drink distinctly more cheaply than I would have done 10 minutes later.

The tax savings contained in the Budget are operated by Budget resolutions which maintain the legal background to the tax until the Finance Bill has caught up with them and received Royal Assent. That is the procedure. In this case there was no Budget resolution. Although it is taxation—that fact is one of the reasons that make it more difficult for the Committee to deal with it satisfactorily, which I acknowledge at once—in fact there was not and could not be any Budget resolution. The Bill is not yet law. It may perhaps never become law, we do not know. However, the liability has been imposed on the citizen since the beginning of April. That is as plain an example of the enactment of retrospective taxation as one can imagine. It cannot be overcome by saying airily and several times, as did my noble friend, "It was in the Budget". It was not legally in the Budget; it was simply forecast by the Chancellor of the Exchequer as a proposed piece of legislation in the course of what was, if I may say so, an admirable Budget Speech. I beg to move.

Lord Harmar-Nicholls

I have nothing to say in regard to the amendment. I was rather intrigued by my noble friend's point regarding what is a "Budget". What is a Budget if it is not the Budget Speech? I have never felt that the Budget had to be printed in some form to be identified, and that the Budget Speech was something quite different. On that narrow point I shall be interested for any explanation from my noble friend concerning my doubts. I should have thought that the Budget was the Budget Speech and not simply a forecast.

Lord Boyd-Carpenter

To help my noble friend, the Budget Speech, like any other speech—including that of my noble friend—does not have any actual legislative effect. What has legislative effect are the Budget resolutions which are carried after the Chancellor of the Exchequer has sat down in another place. The tax changes it is desired to put into effect at once are authorised and remain authorised until the Finance Bill becomes an Act by those resolutions. The point I was seeking to make—I am sorry it was not made clear to my noble friend—is that, whereas that was true of the tax changes in the Budget, it was not true of these provisions.

4.15 p.m.

Lord Cockfield

I do not wish to enter into the metaphysical argument raised by my noble friends but perhaps I may say that the case put by my noble friend Lord Boyd-Carpenter is a great deal stronger than he made it out to be. The tax increases which take effect immediately are only those covered by the provisional collection of taxes Act, as amended. Where taxes are not covered by the provisional collection of taxes Act, they normally take effect from a later date; that is, the date of the passing of the Act or 5th August. That is true, for example, of capital taxes. Therefore, if one is provident enough to remain in existence until after 5th August, one escapes any increase in the capital taxes which may otherwise be charged. Normally the right course is for an increase in a tax of this kind to operate on the passing of the Bill and not as from an earlier date.

Lord Renton

My noble friend Lord Boyd-Carpenter was Financial Secretary to the Treasury for four years and Chief Secretary to the Treasury for two years. When he gives us the benefit of his experience it must be taken seriously.

My noble friend mentioned the question of retrospection. I too would dare to improve on what he said in regard to that one point by reminding the Committee that, although retrospection in favour of the subject is regarded as a permissible legislative device, retrospection against the subject has always been frowned upon. This provision concerns retrospection against the interests of the subject and therefore it is wrongful retrospection.

Lord Boardman

I should like to speak, first, in support of the amendment and the argument put forward by my noble friend. I wish also to raise one other point which I hope the Minister will take into account. It concerns the size of the imposition, which I understand to be something over £600 million. That places a not inconsiderable burden on industry at the present time. When industry is suffering from cash flow problems in the present economic climate, the worst that can be done is to introduce legislation which in many respects is retrospective and add that cash burden to its problems.

Lord Mottistone

I want to add to what my noble friend Lord Boardman said. But there is also a practical point for my noble friend to consider. When the Bill is enacted—which presumably will be within the next month or so—four months will have elapsed since 1st April in which it will now be necessary for people to produce evidence of travel which they may not have collected last year because last year it was not necessary. One cannot expect small busy companies trying to survive in difficult circumstances that the Department of Social Security does not recognise, to collect information sufficient to apply the new legislation retrospectively. They may not have done so and may not possess it. Therefore, for all the reasons that have been given, it seems very wrong indeed. It is also wrong for the practical reason that if my noble friend is not prepared to accept the amendment as it stands, which would be the fairest thing to do, or to allow time to prepare for what has to be done, then at least, as suggested by one Member of the Committee, the measure should come into effect at the earliest opportunity; namely, when the Bill is passed. I hope that my noble friend will consider that.

Lord Carter

It may help the Minister to know that in principle the Opposition support the Bill. So far everyone who has spoken on his side of the Chamber has attacked it. I refer to the retrospective effect which is extremely important. It relates to the whole of the management of the National Insurance Fund. I remind the Committee that the net cost of rebates and incentives to opt out of SERPS is estimated at almost £6 billion. In addition, there is £1.8 billion from general taxation and for benefits which the National Insurance Fund cannot pay because of the SERPS rebates. There is a further £800 million on taxation by April 1993 in relation to extra tax relief. All that arises from that aspect of the National Insurance Fund alone. We now have this additional impost which is retrospective. We certainly support the principle of the Bill. The whole exercise seems to underline the mess which the Government have made in the management of the National Insurance Fund.

Lord Banks

I support the amendment. The case made by the noble Lord, Lord Boyd-Carpenter, is solid. We should pay attention to what he says because of his great experience, to which reference was made by the noble Lord, Lord Renton. My advice to the Committee is to support the amendment because retrospective legislation is involved.

Lord Henley

It will come as no surprise to the Committee and no surprise to my noble friend Lord Boyd-Carpenter when I say that I cannot accept the amendment. It will also come as no surprise to my noble friend if I repeat what I said at Second Reading; namely, that the provisions of the Bill were part of the Budget package as a whole. My noble friend, Lord Boyd-Carpenter, said that that is no defence. I simply do not accept that.

Lord Boyd-Carpenter

I apologise for interrupting my noble friend so soon. He said it was passed in the Budget package as a whole. What does he mean that it was "passed", and when was that done?

Lord Henley

My noble friend should not put words into my mouth. I did not say that they were "passed" but that they were, part of the Budget package as a whole". I intended to go on to say that that package of measures took into account the prospect of the extra income to the National Insurance Fund to the tune of about £610 million in 1992–93, based on a starting date of this year. In passing, perhaps I may say to my noble friend Lord Boardman, that that reflects less than 0.02 per cent. of the overall labour costs of businesses. There are of course the corporation tax offsets which should be taken into account. As I explained at Second Reacting, the Bill addresses a deficiency in the current national insurance system, and it would not be right, having recognised such a deficiency, to allow it to continue for a further year. Nor can it be said that the Bill breaches any principle of retrospection; it is a Budget measure and such measures are usually introduced from the beginning of the tax year. The proposal to introduce the new contributions was, as my noble friend quite rightly said, announced in the course of the Budget Statement on 19th March.

I should also remind the Committee that the first payment of the new contributions will not be made by employers until mid-1992, unlike the tax on my noble friend's whisky. As I have explained, we are consulting with employers' representatives on the details of the collection and payment system for the new contributions. We will issue guidance to employers on what to do by the end of the year. That should ensure that they have time to make the necessary arrangements before the proposed payment date of June 1992. I take the points that my noble friend Lord Mottistone made about some employers possibly not having the necessary evidence. We shall take into account what evidence might be necessary this year as regards the number of business miles that employees have driven.

I must point out to my noble friend that employees themselves will have details of their business mileage. They are already taxed on their company cars and they need to keep those details themselves. I see no reason for employees not making those details available to employers. We sent out a mailshot to all employers explaining the position shortly after the Budget. Therefore, all employers will know what the position is. Having said that, I hope that my noble friend will not feel it necessary to press the amendment.

Lord Mottistone

In answering my noble friend Lord Boardman, my noble friend said that the cost of £600 million would be 0.02 per cent. of the labour costs of the companies. He repeated that argument many times on individual points when the Social Security Bill went through this House. I hope that my noble friend is adding up all these items because a little more of this kind of legislation, particularly when it is retrospective, will mean that he will say that another 0.02 per cent. is involved. Someone will say that that adds up to 10 per cent.

Lord Henley

I said that it would be 0.02 per cent. of a business's overall costs. I did not go on to say that the net income to the Government will be somewhat less because there will be offsets. I also did not stress the other concessions to business in the Budget Statement which more than exceed £610 million.

Lord Boyd-Carpenter

I find my noble friend's emphasis on his suggestion that this is part of the Budget a little unsatisfactory. It is perfectly true that it was included in the Budget Speech. However, what my right honourable friend the Chancellor of the Exchequer says does not have any legislative effect. As has been pointed out—although my noble friend has not dealt with the point—the provisions which the Chancellor of the Exchequer wishes to put into effect immediately following the Budget are the provisions which are carried in another place as part of the Budget resolutions on the same afternoon. They remain effective until the Finance Bill catches up with them.

There is nothing of that kind in this particular instance. I find my noble friend's attitude very unsatisfactory. He did not even mention one of the suggestions made by one of my noble friends that a possible compromise would be to make this a liability which arose as from the date of the Royal Assent to this particular measure which would at least cure it of retrospection. It is a very unsatisfactory position with which the Committee has been presented. I hope and believe that, now the Leader of the House is here, he will be taking the matter on board and considering whether the Committee should carry the burden of having been prepared to accept what most people regard as wholly unacceptable—that is to say, retrospective taxation. In the hope and belief that such consideration can be given before he next stage of the Bill, I do not wish to prejudice that consideration by noble Lords. I am pretty certain that the matter will arise again at Report stage. At the moment, and while consideration can still be given to the matter, I ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 6 agreed to.

House resumed: Bill reported without amendment.