Clause 3 - Agreements and joint elections: Great Britain
National Insurance Contributions and Statutory Payments Bill
10:15 am
Mr Norman Lamb (North Norfolk, Liberal Democrat)
We, too, welcome the intention behind the clause. There is clearly a case to be made that the existing arrangements act as a disincentive to employers to offer to employees such remuneration as restricted or convertible securities. Can the Paymaster General indicate what estimate her Department has made of the impact of the extension of the rules to cover restricted and convertible securities? What will be the extent of their use, in the Treasury's estimation?
Secondly, the regulatory impact assessment states that a model form of election will be provided on the Inland Revenue website. Can the right hon. Lady confirm that that will be the case, and that it will be there before the rules come into force? We often hear about things not being available when they are needed. The hon. Member for Hertford and Stortford asked for clarification of what is covered by the term
''securities with artificially depressed market value'',
and I shall be equally interested in the Paymaster General's response.
The regulatory impact assessment also refers to the fact that the effect would be a £15 million transfer from employees to employers by virtue of the employees taking up the burden of paying the secondary contributions. I shall be interested to know how that assessment was made. What is the science behind it and how robust is it? Equally, on the same issue, the regulatory impact assessment identifies, in terms of risks of the legislation, the fact that security-based remuneration may not provide a sufficient incentive for employees if the total income tax and national insurance contributions burden that they face is increased to include secondary national insurance liability. The assessment rates that risk as low. I should be grateful if the Paymaster General could justify that. I believe that it is likely to be the case, but why is it assumed that it will not put employees off going for such remuneration?
There is also stated to be a risk of employees defaulting on obligations to pay secondary national insurance contributions. How does the Treasury assess that risk as low? The Inland Revenue would lose out because it would not be able to recover them from the employer. There could be circumstances in which an employee moved out of its jurisdiction—the hon. Member for Hertford and Stortford has referred several times to employees moving abroad—so,
although that person was liable to pay the secondary contribution because of the agreement or election, the Inland Revenue would have lost the opportunity to recover it from him or her and would not be entitled to recover it from the employer. Is the risk really as low as the assessment claims?
Finally, the regulatory impact assessment says, at page 16, that the Treasury has
''set up compliance mechanisms to ensure the employer has a vested interest in the employee meeting the liabilities''.
It then says that the employer will not be able to make joint elections again if the employee defaults. Is that the compliance mechanism? Is it as simple as that: if there is a default, is the employer prevented from ever entering a joint election again, or do other aspects of the compliance mechanism impose an incentive on the employer to ensure that the employee meets the obligations in place of the employer?