National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill

Mel Stride Excerpts

2nd reading: House of Commons & Ways and Means resolution: House of Commons
Tuesday 30th April 2019 Commons Chamber

[The Financial Secretary to the Treasury (Mel Stride)]

I thank all right hon. and hon. Members for their contributions to this important debate, which is narrow in scope, as the Exchequer Secretary to the Treasury pointed out, but none the less important. There were a limited number of contributions, made up for, however, by their quality.

Let me bring us back to the essential element of what this Bill is all about, which is aligning the employer national insurance treatment in respect of termination awards and sporting testimonials with that of income tax. As a number of hon. Members pointed out, the rationale behind these measures is to bring in alignment and, with it, some elements of simplification. We should remind ourselves that, as we have heard, the genesis of this journey was back in 2013-14, with the report by the Office of Tax Simplification. Another rationale for these measures is to disincentivise any tendency towards the manipulation of payments as between earnings and termination payments on the tax side of things. There is, of course, additional revenue to the Exchequer of some £200 million per year as a consequence of these measures.

I turn now to some of the specific points that have been raised—first and foremost, by the hon. Member for Bootle (Peter Dowd). He told us some jokes about cricket that were not bad—well, by his standards, at least, they were passable. He managed to remember two of the three great football teams up in the Liverpool part of the country, proving conclusively, I have to say, that he knows far more about football than he does about economics and taxation. [Interruption.] Yes, cruel but fair. That was exemplified by his lamenting the fact that we did not abolish class 2 NICs. I was surprised to hear him say that, because he was at great pains, as he always is, to be the champion of the lower paid—as indeed are Conservative Members. The rationale for stepping back from that abolition, as he will know, is that it would have imposed a very significant burden on the very people he seeks to protect—the lower paid—by putting up the cost of the contributions that they would have to make in order to qualify for their state pension.

Curiously, the hon. Gentleman accused us, contrary to the assertions of the hon. Member for Oxford East (Anneliese Dodds), of having rushed the timetable for this legislation, despite the fact that its genesis was about five years ago. That is probably indicative of the speed at which a future Labour Government would get things done—five years is rushing it, in those terms. He also accused us of not taking the legislation seriously, but as he spoke there were precisely none of his hon. or right hon. Friends sitting on the Benches behind him.

My hon. Friend the Member for South Suffolk (James Cartlidge) gave a masterful performance in which he not only showed great in-depth knowledge of the issues at hand but understood the mentality and the challenges that we have as Ministers in the Treasury. It is indeed a restrictive environment where we do not want to put people’s taxes up, we make commitments not to do so, and we fight day in, day out to ensure that we stick to those pledges. But at the same time, we do of course have to raise revenue, as he described. He also cantered around the tax terrain, touching on IR35, auto-enrolment and various other aspects of tax. It was a very thoughtful contribution to the debate.

The hon. Member for Aberdeen North (Kirsty Blackman) specifically referenced the amount of consultation—or the lack of it, as she saw it—around the Bill. I should remind her that we have consulted on it twice. It was issued in draft in December 2016, and it was prefigured when we handled the income tax aspects of these issues in the 2016 and 2017 Finance Acts. Of course, the measures themselves were first mooted back in 2015, so we have been round the block with them.

[Kirsty Blackman]

The point I was making was not that there was necessarily a lack of consultation, but that we did not know how much consultation there had been, because the details are not in the explanatory notes, where they would often be. Normally, the explanatory notes will say a bit about the amount of consultation there has been, but they do not say anything at all. If that had been written down for us, and we had known how many consultation responses there had been, I would not have asked the question.

[Mel Stride]

The Exchequer Secretary to the Treasury has just reminded me that there has been a lot of information out there—we have, not least, written to Members to explain the background to these measures.

As to the hon. Lady’s specific point, she has raised the quality of information memorandums with me before in a different context. I said on that occasion, and I will restate now, that I am happy to look at the point she has raised. While we may have disagreements over policy across the House, I think we all accept that it is important that the relevant information is clearly provided and in the right place, and I will certainly be happy to look at that issue.

The hon. Lady raised the issue of tax treatment where there is an expectation that a testimonial payment will be made. She understandably asked how we know whether such a payment should be seen as having an expectation attached to it. The answer is if that payment is customary. If someone is involved in a sports club of some sort, and there is a testimonial every year for a particular player or group of players, and that had been going on for some time, that would be a customary testimonial situation. In those circumstances, the tax treatment would follow accordingly.

The hon. Lady also raised a point about employer NICS at 13.8% being applied above the £30,000 threshold. She raised the prospect that some of that may be borne by the employee, because the employer would have a certain amount that they were looking at. She raised the question of what the balance was between who bears that cost and the £200 million per year received by the Exchequer. I very much doubt that that information is available, but if it is, I will certainly make sure that we provide it to her. That may be an issue she wishes to come back to in Committee.

My hon. Friend the Member for South Thanet (Craig Mackinlay) specifically majored on the threshold—the £30,000—and pointed out that it first came into effect in 1988. What I would say to him is that, in the case of Germany and the United States—certainly in the case of income tax—the threshold is effectively zero, so in terms of international comparisons, the figure of £30,000, while it is true that it has not increased by inflation since 1988, is none the less set at a reasonable and proportionate level. As a number of speakers have also pointed out, 80% of termination payments are below the £30,000 threshold in any event and would therefore not fall under this employers’ national insurance.

The hon. Member for Oxford East, as well as helpfully pointing out that Labour’s mission is to increase corporation tax, came on to the issue of avoidance and evasion, particularly in the area of football. She thought I would mention the Rangers case, and it is important to do that, because it does indicate that we will take cases right the way to the Supreme Court when we believe that issues such as disguised remuneration are in play. Whether it is in football or other areas of commerce and economic life, we will make sure that the right amount of tax is paid. I will not rehearse the arguments that the hon. Lady has heard from me on many occasions about the tax gap and how successful the Government have been in that respect compared with Governments of the past.

The second issue the hon. Lady raised was charitable giving. She set up the prospect of a testimonial being held and the money going through the committee and then on to a charity. She asked what the tax treatment would be in those circumstances. It is open to a committee in that situation to route some of the money via payroll giving to the charity—that is without limit—to make sure that that is done in the most tax-efficient manner possible. However, she may wish to return to that matter in Committee, where we can perhaps have a more detailed debate about it.

The hon. Lady asked about seeking evidence of the abuse of termination payments—in other words, disguising what are essentially earnings by transferring them into a termination payment, thereby reducing taxation. HMRC is clear that there has been evidence of that in the past. I am sure that she will wish to revisit the matter in more detail in Committee.

The hon. Lady mentioned the impact of these measures on wages, citing the correct figure of 0.1% for the reduction by 2020-21. However, I point out that we have now had 10 months of increased real wages, due to our success in keeping inflation down and generating nominal wage growth. Of course, with regard to employment, which is part of the issue we are addressing, we now have among the highest levels of employment in our history, and the lowest unemployment since the mid-1970s.

The hon. Lady asked what guarantees there are that we will not reduce the threshold in either case. Of course, it is up to this Government, or any future Government, to take a view on these matters, but I can assure her that we have no expectation or intention at the present time to lower the thresholds. If we did, that would of course be by way of an affirmative statutory instrument, which means the measure would have appropriate scrutiny.

In conclusion, I thank the Opposition and all Members for their contributions, and for not opposing Second Reading.

Question put and agreed to.

Bill accordingly read a Second time.

National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 16 May 2019.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Proceedings on Consideration and up to and including Third Reading

(4) Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion two hours after the commencement of proceedings on Consideration.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption that day.

(6) Standing Order No. 83B (programming sub-committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Mel Stride.)

Question agreed to.

National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill (Ways and Means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purpose of any Act resulting from the National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill, it is expedient to authorise provision adding termination awards chargeable to income tax to the amount by reference to which, in the case of Class 1A National Insurance Contributions, the appropriate national health service allocation (for England, Wales and Scotland) and the appropriate health service allocation (for Northern Ireland) are to be calculated.—(Mel Stride.)

Question agreed to.