National Insurance Contributions Bill

Lord Davies of Oldham Excerpts

Tuesday 25th November 2014 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, as the noble Lord, Lord Razzall, indicated, the Opposition support this Bill. In fact, he succeeded in raising most of the critical points that I was going to make in my contribution—a growing sign of just where the Liberal Benches stand as we get closer to the general election, I suppose. It certainly obviates the necessity for me to repeat all those points.

This is a fairly modest Bill, but a constructive one and one that went through without opposition in the other place, although I congratulate my honourable friend Shabana Mahmood on her contribution to the debate there. She raised the points that the noble Lord, Lord Razzall, reiterated today. She was not entirely satisfied with the responses. The noble Lord, Lord Razzall, obviously is not as yet. He thinks that there are still questions, and so do I, but those questions are more on the margin than on the central thrust of the Bill, which we endorse.

It is important that we get this issue right. Some 4.5 million people are now self-employed in this economy, which is one in six people. Of course, in many cases that will be through choice, but in many other cases it will reflect the fact that getting a job that pays remotely adequately remains very difficult for many people and that there are those who are self-employed because the people who organise their work see advantages in doing so on that basis, as tax advantages accrue to the organisers of the work as well as, supposedly, to those who are self-employed. I am therefore glad that the Government have taken up this issue and have addressed their mind to improving the situation.

We are in favour of the simplification contained in the Bill, and we wholeheartedly endorse the other main objective which is the targeted anti-avoidance rule. It means that we can tackle disguised employment made possible through employment intermediaries or offshore employers. We need to make sure that the Exchequer gets its proper receipts from those working in the economy and effectively owing a contribution to the finances of the nation.

We recognise that it is important that the Government get the specifics of this position right. At present, 0.3% of the £102 billion collected in NI contributions engenders 40% of the calls to Her Majesty’s Revenue and Customs. There is something clearly wrong with this distortion, and it all revolves around the category of the self-employed. That is why the Government have acted, and they have acted well in ensuring that the class 2 payers of NICs can now pay at the end of the tax year, and that they have their assessments worked out on the basis of self-assessment. So we are clearly seeing an improvement in the position, which we greatly welcome.

The noble Lord, Lord Razzall, raised the maternity issue. I will therefore not reiterate what he said except to endorse that there are still anxieties. The Chartered Institute of Taxation said that it had enough anxieties and question marks to urge the Government to think in terms of reviewing the situation within two years, and I hope that the Minister can, perhaps, be categorical in his and the Government’s determination to guarantee that this occurs. The maternity allowance affects about 25,000 women each year who claim for it, and it is absolutely critical that the system should work effectively for them.

I also endorse the point made by the noble Lord, Lord Razzall, to which the Minister made some reference in his opening remarks. It is quite clear that the Government have to be successful in their communication of the benefits of this legislation and the way in which people respond to it. Increasingly, the Inland Revenue, for all the obvious reasons, uses the internet and the computer for communication, and expects people to be online in response. A great number of our fellow citizens are only too delighted that their tax returns and obligations to the Government are met in this much more efficient and effective way. But a great many of the self-employed, for the very reason that I established the categories in the early part of this speech, have limited abilities and understanding of how to use the internet. We have just got to recognise that a substantial percentage of our population are not computer literate. An awful lot of them will be in the category of those who are in the self-employed ranks. That is why we need the assurance of the Government that they are going to carry out an effective programme of communication to all of our citizens, to ensure that there is a fair deal for the less advantaged among them, as well as the more obviously computer literate. I hope that the Minister will give some reassurance on that front.

Of course, people will get a vague perspective that the Government have done something about the NICs situation. But there is a difference between that and being able to implement action which defends their own direct interest, as the NICs payments are clearly of such significance to the substantial number of people who get very little returns in their self-employment statement. If there is any doubt about just how lowly the returns can be to the individual, just look at the Exchequer’s problem in indicating the lower level of receipts it has been getting in certain categories. A great deal needs to be done to make this legislation effective and fair.

Of course, we endorse the targeted anti-avoidance rule. It is clearly important that workers who are self-employed are in that position through their own wishes and are not just badged as self-employed by those people who take advantage of their labour, and organise it, and do it on a self-employed basis for the obvious advantages it gives to the so-called employer, or organiser of the work, in taxation terms. Clearly, if people fail to meet their NICs payment, they will have no provision for holidays or even for sickness, unlike others in the workforce, so this is an important piece of legislation for a substantial section of our population —and a growing section, as we all appreciate.

The Bill went thorough the Commons without a Division. It is not customary to divide the House at Second Reading and therefore I have no intention of doing so in any case. However, as the House will recognise, the Opposition are fully behind the Bill. We have a few questions that we want the Minister to answer satisfactorily but we join him in commending the Bill to the House.