Off-Payroll Working (Economic Affairs Committee Report)

Lord Balfe Excerpts

Wednesday 27th April 2022 Grand Committee

[Lord Balfe (Con)]

My Lords, I thank the noble Lord, Lord Bridges, for instigating this debate. I did not serve on the committee, and this is not my area of expertise, but I would like to offer a few thoughts. It seems to me that this is a very classic case of when the market works out a solution to or a way around a problem that has been given to it by the Government.

The key thing here, of course, is the figure in the report that the number of individuals working through umbrella companies has increased from 100,000 to 500,000 in the last 15 years. This has clearly happened because it is of value to work for an umbrella company, although the report also makes the point that

“many contractors had been left in an undesirable ‘halfway house’: they do not enjoy the rights that come with employment, yet they are considered employees for tax purposes. In short, they are ‘zero-rights employees’”.

This is the problem.

As we come up to a new Queen’s Speech, now would be an ideal time for the Treasury to try to get to grips with the whole problem of how you treat people who are earning money from others. The problem is not just as outlined here; it is endemic in society, and I have come across it many times. I wonder whether other noble Lords have—I would be surprised if they have not come across the tradesman who says, “Cash only, of course”. I do not know of a single cleaner in the city of Cambridge, where I live, who pays tax. My wife had a very interesting conversation with a Polish cleaner whose child had gone into hospital. She said to the cleaner, who was a very nice lady, “Who do you think is paying for this hospital?” The cleaner said, “The Government”, and my wife said, “No, we are, because you are not paying any tax on the money that you get from us”. There is this great gap.

One of the things that not just the Government but the country has got to get to grips with is the way in which people are remunerated. I remember when I was an MEP and we had a nanny, and I was advised very firmly by the Labour Party that I should make sure that I paid tax on what we paid the nanny, because the one thing it did not want was a scandal involving an MEP who was hiring a nanny and not paying tax—so we paid tax. Most of our friends were absolutely astonished; they just could not believe it, until it was explained to them that it was because the Daily Mail might get hold of it and we would be all over the papers.

In this country, we run a system in which the evasion, frankly, of tax is built in and widely accepted. We need to look at this, keep the efficiency of off-payroll payments under review and make sure that the legislation is fair. But we also need to look at the Taylor report, which is what brought me into this, because there are a number of trade union issues that need to be looked at to ensure that workers are being given a fair crack of the whip. This has to be done by legislation: you cannot go around the country saying to individuals, “You must do this”, but you could get them to sign a form saying that any payments they have made have been declared to the Revenue. Alternatively, you could get them to sign a simple form for taking tax.

But my view is that, unless we tackle the very basis of the problem, gradually there will be another way around the situation, and another. It will be rather like our garden hose: every spring, when we turn it on, somehow, without any help from us, it seems to have sprung four or five new leaks, which then need binding up—and, by the next spring, you have four or five more. That is what our tax system seems rather like at the moment.

I ask the Minister, who I realise is strongly constricted in what she can say today, at least to say that she will go back to the department and see whether we can have a root-and-branch look at the ways in which remuneration is paid and rights are given to and taken away from people. It is a matter of basic fairness that, if you live in a society, you should pay your taxes and you should all get the same benefits. It should not be possible for employers to get out of giving benefits, in a fiscal way, because it is good for them financially not to give them to the people who are doing the work.

There is a big challenge ahead, a much bigger one than some would like to admit, but one that has been left to lie dormant for probably the last 20 years. This is not a matter of this Government and this Prime Minister; it has not been faced since the Blair Government came to power. It was resolved to make it easy for people to work and move around, and that laxness has been in the system for a long time. I hope the Minister assures us that she will try to make some reforms.