Financial Services Bill (Fourth sitting)

Debate between Miriam Cates and Andrew Jones

Committee stage & Committee Debate: 4th sitting: House of Commons
Thursday 19th November 2020 Public Bill Committees

[Miriam Cates (Penistone and Stocksbridge) (Con)]

Q You said that consumers expect different things in different markets. In your briefing note, you said that the Bill will allow the FCA to develop a methodology that is more accurate and that works for the UK market. Can you give an example of a characteristic that is specific to the UK market and how the Bill will help to meet those expectations?

Hugh Savill: If you are buying insurance in the UK, you tend to buy it online for general insurance, or you will quite often use an independent financial adviser to buy life insurance and savings policies. That does not happen on the continent of Europe. There, there is a little shop in most small towns, and people go and buy their general insurance from that shop. If they want savings policies, whether that be insurance or other kinds of savings vehicles, they will go to their bank, so it is a completely different approach and entry into financial services.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

Q Thank you very much for giving evidence today, Hugh. One quick question about the market access arrangements: do you think there will be any price implications from those for UK consumers? Could we see price inflation via premiums increase as a result?

Hugh Savill: Sorry, from the market access arrangements, did you say?

Finance Bill (Ninth sitting)

Debate between Miriam Cates and Andrew Jones

Committee stage & Committee Debate: 9th sitting: House of Commons
Thursday 18th June 2020 Public Bill Committees

[Andrew Jones (Harrogate and Knaresborough) (Con)]

The issue of off-payroll working has attracted much attention in the House and beyond. Clearly, there are some problems to solve, but they are not easy problems to solve.

In some cases, the issue is straightforward. People work for one employer for prolonged periods up to several years and they really are employees, because they do similar jobs to colleagues and use company equipment, but they do so on different terms. It may be that they are better paid in terms of headline salary than their immediate work neighbours, but the situation is more complex, because they are not paid for holidays or potential pension contributions and so on.

Some workers may have been put under pressure to become self-employed by less scrupulous employers who have sought to save money on things such as NI payments. I have read of cases—I am sure we all have—where the imbalance of power that can exist between an employer and an employee has seen pressure on people to choose a particular route. That is not satisfactory for those employees or taxpayers generally as revenue for public services is missed.

While some may have been pressured into becoming self-employed, vast legions in our economy have chosen the self-employed route because they enjoy the challenge of that type of work or they want to be more in control of their own destiny, which being your own boss can achieve, or many other personal reasons.

That is to be really encouraged, because the flexibility that self-employed workers, often on contracts, provide has been a great boost to our economy. It is one of the ingredients that has contributed to the recent economic progress that we have enjoyed. Being swift of foot in response to commercial opportunities gives a competitive advantage. It has allowed companies to bring in extra resource where they need to boost operational capacity. It has allowed extra skills to be brought into a company when needed. Many people I have met or corresponded with in my Harrogate and Knaresborough constituency have highlighted to me that they have built careers adding real value to their clients.

There are some sectors where the use of contractors is more prevalent than others. We have just been hearing about the oil and gas sector, but that includes IT and technology more broadly, as well as marketing and the creative industries, sectors where the UK is strong, and where I worked before coming into this place. This is about bringing skills and capacity into a company when needed but when there is not enough work for long-term permanent employment. There is also the issue of the growing sector of interim managers.

I see a balance to be struck here in the way the issue is taken forward by Ministers between protecting some employees and recognising that the vast majority have chosen self-employment and are providing real value. We need to balance employment rights and protections between the employed and self-employed, while ensuring that the rules do not have a sclerotic effect on our economy. Flexible, nimble companies responding to customers, adding value, creating wealth and grabbing opportunities is how economies grow and jobs are created. Ensuring that is preserved is critical to the operation of these rules. That is something the Minister must consider as he takes this forward.

[Miriam Cates (Penistone and Stocksbridge) (Con)]

I refer hon. Members to my entry in the register of Members’ interests. This is clearly a contentious issue, but the majority of employers and contractors I have spoken to agree that some kind of reform is necessary.

Our tax system must be fair, but it should also support those who take risks to grow businesses and innovate in a way that benefits our whole economy. It should not offer advantages to those who are using PSCs to create wealth only for themselves. I am certainly not saying that it is wrong to create personal wealth, just that our tax system should not offer particular advantages in doing so and tax should not be avoided as a result. We must balance flexibility with fairness and it is not fair that two people doing the same job in broadly the same conditions pay different rates of tax. We must recognise that those who are genuine contractors do not have the same benefits as employees—they do not have the same job security—but where someone is to all intents and purposes an employee, they and their employer should pay their fair share of tax and national insurance.

I have personal experience of running a small business in the tech sector and I believe that current practices discourage people from becoming employees in some sectors. For example, in the tech industry, people with certain programming skills can command such high day rates as contractors that there is very little incentive to become an employee in a small company. That is a particular issue in a sector where there is a shortage of talent and a great demand for skills.

While there is and always will be a role for contractors, contracting costs can be prohibitively high for start-ups and scale-ups, and those businesses find it difficult to recruit employees with the right skills. Start-ups and scale-ups need employees—people who are committed to the company, who can help shape its culture and, importantly, who can pass on their knowledge and skills to new employees as the company grows. Labour market flexibility has to work for employers and employees. At the moment, the very businesses that we most need to grow and innovate are struggling to recruit skilled employees, especially in areas outside London and the south-east, such as Sheffield and Barnsley, which I represent.

I believe that the reforms will make employment and the benefit that it brings more attractive. As I said, we should be using the tax system to support those who create wealth not only for themselves, but for our whole economy. In that way, any tax saving to an individual or company is an investment for the taxpayer, not just lost revenue. A great example of that is the research and development tax reliefs, which I am delighted have been increased in the Bill and will encourage the kind of innovation that the UK really needs to boost growth and productivity. They are incentives that help to create wealth for us all.

In contrast, using a personal service company to reduce an individual’s tax burden does not benefit the taxpayer. The individual’s income tax and national insurance savings are not used to create other jobs or to invest in technology or create products, and so the taxpayer does not receive any return on the lost revenue. Where a worker is genuinely self-employed, facing additional risks, with none of the benefits of employment, there should be no change, but where someone is to all intents and purposes an employee, improving compliance should make sure the taxpayer does not lose out.

I understand that any changes bring risks and uncertainty and I am pleased that the changes to IR35 have been delayed for a year to give our economy some chance to stabilise after covid-19, but fairness should be the foundation of our tax system and properly applied, the regulations will help to achieve that aim.