Clause 2 — Secondary Class 1 contributions

Orders of the Day — National Insurance Contributions Bill – in the House of Commons at 5:55 pm on 10th June 2002.

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Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury 5:55 pm, 10th June 2002

I beg to move amendment No. 6, in page 3, line 1, leave out from beginning to end of line 3 and insert—

'(2) For the purposes of this Act the secondary percentage is

(a) 12.8 per cent. the "full percentage", for all employers who do not provide health insurance;

(b) 11.8 per cent., the "reduced percentage", for employers who do provide health insurance in respect of those employees for whom they provide health insurance.'.

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

With this it will be convenient to discuss the following amendments: No. 7, in page 3, line 1, leave out from beginning to end of line 3 and insert—

'(2) For the purposes of this Act the secondary percentage is

(c) 12.8 per cent., the "full percentage", for all employers who are not themselves subject to Class 4 contributions, as set out in section 3 below;

(d) 11.8 per cent., the "reduced percentage", for employers who are self employed, meet the conditions of subsection (3) below, and are, themselves subject to Class 4 contributions, as set out in section 3 below.

(3) The reduced percentage is available to employers that have business turnover less than £1,000,000 per annum.

(4) For the purposes of subsection (3) above, the business turnover of all persons in partnership with the employer is taken in aggregate. The reduced percentage is available only if the aggregate meets the conditions of subsection (3).'.

No. 12, in page 3, line 1, leave out from beginning to end of line 3 and insert—

'(2) For the purposes of this Act the secondary percentage is

(a) 11.8 per cent., the "reduced percentage", on the costs of employment, on which Class 1 Secondary National Insurance Contributions are levied, of employees who meet the conditions set out in subsection (3) below;

(b) 12.8 per cent., the "full percentage", on the employment costs of all other employees.

(3) For the purposes of this Act, the reduced percentage is payable on the costs of employment of an employee, on whom Class 1 Secondary National Insurance Contributions are levied, where the employee is employed by a service company, which has turnover less than £1,000,000, of which the employee is also the main shareholder. For these purposes, main shareholder means that the employee owns more than 75 per cent. of the ordinary share capital of the service company that employs him.'.

No. 15, in page 3, line 1, at end insert—

'except for employers contributions in the public sector which will remain at 11.8 per cent.'.

No. 8, in page 3, line 12, leave out from beginning to end of line 14 and insert—

'(2) For the purposes of this Act the secondary percentage is

(a) 12.8 per cent. the "full percentage", for all employers who do not provide health insurance;

(b) 11.8 per cent., the "reduced percentage", for employers who do provide health insurance in respect of those employees for whom they provide health insurance.'.

No. 9, in page 3, line 12, leave out from beginning to end of line 14 and insert—

'(2) For the purposes of this Act the secondary percentage is

(c) 12.8 per cent., the "full percentage", for all employers who are not themselves subject to Class 4 contributions, as set out in section 3 below;

(d) 11.8 per cent., the "reduced percentage", for employers who are self employed, meet the conditions of subsection (3) below, and are, themselves subject to Class 4 contributions, as set out in section 3 below.

(3) The reduced percentage is available to employers that have business turnover less than £1,000,000 per annum.

(4) For the purpose of subsection (3) above, the business turnover of all persons in partnership with the employer is taken in aggregate. The reduced percentage is available only if the aggregate meets the conditions of subsection (3).'.

No. 13, in page 3, line 12, leave out from beginning to end of line 14 and insert—

'(2) For the purposes of this Act the secondary percentage is

(a) 11.8 per cent., the "reduced percentage", on the costs of employment, on which Class 1 Secondary National Insurance Contributions are levied, of employees who meet the conditions set out in subsection (3) below;

(b) 12.8 per cent., the "full percentage", on the employment costs of all other employees.

(3) For the purposes of this Act, the reduced percentage is payable on the costs of employment of an employee, on whom Class 1 Secondary National Insurance Contributions are levied, where the employee is employed by a service company, which has turnover less than £1,000,000, of which the employee is also the main shareholder. For these purposes, main shareholder means that the employee owns more than 75 per cent. of the ordinary share capital of the service company that employs him.'.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

We move speedily on to a group of amendments that may absorb our attention for a little longer than the previous group. The amendments embody several important issues on which I want to focus in some detail.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I am glad that the hon. Gentleman's enthusiasm for these debates is as boundless as mine.

I want to consider together amendments Nos. 6 and 8. The Paymaster General will be aware that the Bill as drafted imposes an increase in national insurance contributions on employers that applies universally.

The Government have advanced the rationale that the purpose of the measure is to provide the wherewithal to finance improvements in the national health service. The gravamen of our argument on the amendments is that many businesses already provide health insurance for their employees and that it is fair in those circumstances that they should be relieved of the additional burden that I, in my understated way, described as "brazen, brutal and a triumph of hope over reality" a few moments ago.

It appears that the Government have no intention of providing that relief, but it seems—at any rate to Conservative Members—that there is merit in doing so. I would, therefore, like to say something in relation to amendments Nos. 6 and 8 at the outset. They would enable employers who are providing health insurance packages for their employees to be relieved of the 1 per cent. increase in the national insurance contribution. For the avoidance of doubt, if the amendment were accepted—obviously, I am keenly hopeful that the Committee will be persuaded of the merits of the arguments and will vote accordingly—employers who already provide health insurance for their employees will continue to pay what is described in the amendments as "the 'reduced percentage'" in national insurance contribution of 11.8 per cent., whereas those who provide no health insurance—

Photo of John Mann John Mann Labour, Bassetlaw

Will the hon. Gentleman give way?

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

In a moment, if the hon. Gentleman will contain himself.

Employers who provide no such insurance for their employees will be obliged to pay the increase and will therefore pay 12.8 per cent.

I am eagerly enthusiastic to explain some of the background to, and arguments for, our proposition but I am afraid that I can resist John Mann no longer.

Photo of John Mann John Mann Labour, Bassetlaw

Before the hon. Gentleman elucidates further, I have a question on the clarification of definitions. When he talks about employers providing for their employees, does he mean individual employees or the company? In other words, where a company only provides such insurance to a percentage of the work force, how would that affect his proposal?

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I think that the hon. Gentleman means "provides only" rather than "only provides", but we will not quibble unduly about the semantics as the purport of his remarks is reasonably clear. He raises a fair point and my answer, which I shall try to make clear for the benefit of the Committee, is that someone would be eligible as an employer for payment of the reduced percentage as opposed to the increased percentage if, and only if, he or she as an employer were providing health insurance for a substantial majority—probably the majority, if not all—of his or her employees.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

The hon. Gentleman is a hard taskmaster and not easily pleased. I should have thought that my answer was so abundantly clear that only an extraordinarily clever person could fail to see the point, but I give way.

Photo of John Mann John Mann Labour, Bassetlaw

I merely seek slightly more clarification: definition of the word "substantial". The amendment is an attempt to frame legislation, so it is important for the hon. Gentleman to assist our deliberations by giving us a definition of "substantial". Will he be precise about the basis on which an employer would pay the lower rates under his proposal?

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

The hon. Gentleman is a new Member but he is astute and well informed so I think that he will be aware that when one tables amendments one discusses them with the Clerks, who provide guidance on such matters. The drafting requirements of the Bill, as we have been informed, are such as not to enable us to go into the full details that we would want in due course to pursue. If the hon. Gentleman is putting it to me that, to guarantee efficacy and avoid abuse, we would need some precise definition in practice and some scheme that might require the approval of the Secretary of State, he has a fair point.

There was a very poorly drafted amendment in the last group, on which it would be cruel to focus for too long, but in respect of which Dr. Harris and his sidekick, Matthew Taylor, observed in cavalier fashion that the fact that they had not provided for its application to Northern Ireland was a piddling point that it was pedantic of me to insist on raising. In this case, I think that the hon. Member for Bassetlaw will accept—

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

The hon. Gentleman might get a third go in due course but he must exercise what patience he can muster. The fact that I have not gone as anorakishly into the detail as his natural earnestness and curiosity demand does not of itself invalidate the purpose of the amendment.

The hon. Gentleman would, I fear, like to take us away from the thrust of the argument, which is this: some employers are helping their employees by providing health insurance packages; under the Government's Bill, those employers—despite their forward-looking and employee-friendly policies—will be obliged to pay the tax hike in respect of care for which they are already privately making provision for most of, or even all, their employees. We are suggesting—

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I am always happy to give way, but the hon. Gentleman must be patient. He is doing considerable damage to the leather of his Bench by the frequency of his springing up and down from it—not something that I have ever done, as he will readily testify.

My right hon. and hon. Friends and I think that it is unfair that employers should be obliged to pay twice. We can dilate on that matter. Indeed, I have a suspicion that, subject to your patience and restriction Sir Alan, we might be in for something of a dilation on the subject in the period ahead. However, I do not want in any way—

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

In a moment. I promise the hon. Gentleman that I shall give way to him. I am always intoxicated by his interventions—there is no reason why tonight should be different.

We must not leave the central argument. Is it fair that employers pay twice, or is it unfair? If hon. Members believe that it is fair that employers should have to pay twice, they will support the party of iniquity and vote with the Government. If they believe that it is unfair—if they have a social conscience and favour a progressive approach—they will support the Conservatives. That is the thrust of the choice that lies before us.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I shall in due course give way again to the hon. Member for Bassetlaw if he is patient, but meanwhile I must give way to Mr. Hendrick.

Photo of Mark Hendrick Mark Hendrick Labour/Co-operative, Preston

I thank the hon. Gentleman for giving way and I hope that I can intoxicate him to a level at which he feels satisfied.

Given his concern for responsible employers who want to provide private health packages for their employees and his concern that some employers might, as a result of this debate and the subsequent vote, end up having to pay twice, is he in favour of making all employers provide private packages so that no individual in any company in the land is without private health insurance, thereby removing the need for the extra 1 per cent. that the Government are adding?

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

No. I applaud the hon. Gentleman's ingenuity. I do not want to get too personal, because I like him very much and enjoy jousting with him, but it is unfair—purely, of course, in the context of the amendments on which we are narrowly focusing—that his efforts have not been rewarded so far. I shall have a private chat with him, but in view of how hard he is trying he is suffering cruel and inhumane treatment by having to sit on the Back Benches and not on the Treasury Bench.

The hon. Gentleman is ingenious, but the answer is no, we are not advancing the proposition that all employers should have to provide health insurance. We are not arguing for the privatisation of the system. On previous occasions, he has discussed with us precisely what our health proposals will be. It is to his credit that he tries to establish the answer through both the back door and the front door, through punching above our heads and punching below our feet. He goes hither and thither, this way and that but as yet he has been disappointed, because we are not prepared to provide him with the answer that he would find convenient for his purposes.

However, so that we can be clear and so that it will not be necessary for the hon. Member for Bassetlaw to intervene in a similar way—although he may use different devices in due course—I make the argument explicitly. We are looking at our health care policy. We are doing so with an open mind, in contrast to the closed minds of Labour Members.

The Government's position is clear—it is not in any sense stealthy—and it is honest. Their position is to say that they have learned nothing over the past five years from the countries of continental Europe which translate care more effectively from a word to a deed than they do, and they do not think that they have anything to learn from them in the next five years either.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

The hon. Gentleman does not enjoy the truth being blurted out, but I am afraid that he will have to suffer the results, at least for a short time.

The position of Conservative Members is that we can learn a lot from other countries, whose records on cancer care, cardiac surgery, choice among GPs, guaranteed treatment after 28 days, and no national waiting lists, as in Germany, show that they do things better than we do. We want to look open-mindedly and in detail at those countries. We will consider all the different systems, establish what is best practice, discover what is in patients' interests and, as I have said before, make a judgment.

I do not suppose that the hon. Member for Preston heard me at lunchtime yesterday—it would probably have spoiled his digestion if he had. I do not blame him, but I made the point yesterday—I have to repeat it now—that the Conservatives will consider what needs to be done in the health service, what reforms are required for the purpose, how much those reforms will cost and in what way they should be financed. When we have gone through that considered and logical process of study, we will produce a conclusion. It will be a detailed, credible, costed and attractive alternative to this Government's persistent and disappointing failures in health policy. In due course, that policy will be unveiled by my hon. Friend Dr. Fox, the shadow Secretary of State for Health, and I hope that Mr. Harris will not be disappointed with the results.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

The hon. Gentleman has had several goes. He favours equity of treatment, so he will expect me to give way first to the hon. Member for Glasgow, Cathcart.

Photo of Tom Harris Tom Harris Labour, Glasgow Cathcart

The hon. Gentleman claims that the Government have not learned from the experience of others. May I suggest that they have learned a great deal from the experience of 18 years of Conservative Government, and so have the electorate? That is why a huge investment in the NHS has been planned, in complete contrast to what the Conservative Government did in those 18 years.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

That is a disappointing intervention. I have listened many times during the past 12 months since the hon. Gentleman was elected, and I have been impressed by what I have heard. He is capable of so much better than what he has just delivered, so I am sorry that he delivered it. I say that in relation to the arguments that we shall enunciate for assistance for employers who provide health care insurance for their staff, and I do so conscious of some of the facts in Scotland.

I should have thought that the hon. Gentleman, of all people, would be well informed about the position in Scotland. If he is as well informed as I thought that he was and as I know that he should be, he will be aware of the extraordinary combination of facts on health care provision in Scotland. On the one hand, since his party took office in 1997, there has been a 28 per cent. real-terms increase in expenditure on health but on the other, concurrent with that increase in expenditure, there has been an average increase of 25 per cent. in the waiting time for treatment.

That emphasises the patently true fact that, in health care, it is not simply a matter of increasing spending. Sadly, Mr. Bryant is not in his place today, as he had some difficulty grasping that point when I explained it to him. Manifestly, if expenditure is increased without an accompanying reform, we will not achieve the improvement in performance that we all want. We know in relation to many aspects of health delivery in Scotland that there is more money, but there is not a better performance.

I have already been in danger of straying from the narrow course of the amendment, which I want to commend to the Committee. That is ultimately my responsibility, but because of my natural generosity of spirit, I wanted to give way to Labour Members to allow them to release their frustrations.

The Chairman:

Order. The hon. Gentleman will realise that the more he dilates, the more he attracts interventions. If he were to return more to the detail of the amendment, the Committee would benefit.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

You are always fair, Sir Alan. You are right to castigate me in your gentlemanly fashion, and I shall do exactly as you say. I am very grateful to you for providing me with the protection of the Chair from the needless dilations suggested by right hon. and hon. Members.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I shall give way once more, on the explicit understanding that the hon. Gentleman intends to focus his remarks very specifically on the purport and contents of the amendment.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

The amendment deserves careful scrutiny because it raises important issues. If the increase in national insurance contributions is used to pay for improvements in the health service or extra resources not only for elective surgery, but for primary and emergency care, and given that most people with private health insurance use their insurance to pay for elective surgical care and a few other things, but generally not for primary or emergency care, is it reasonable to say that they are paying twice for emergency and primary care when, in fact, most of them use the NHS for those services? Should not the hon. Gentleman be talking about—not that I support this—a third relief, not a full relief in this measure?

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

The answer is no. [Interruption.] A couple of my hon. Friends generously observe from sedentary positions that the hon. Gentleman alludes to the third way. I am not sure whether it is the third way, the second way, the first way or the fourth way, but it is a characteristically confusing and muddle-headed Liberal Democrat way, which I do not intend to follow. I want specifically to deal with the unfairness—possibly even the incongruity—of employers financing packages that their employees will use while being obliged to pay in full the increase that the Government are demanding to provide for the NHS.

If the hon. Gentleman disagrees with me, he will no doubt have the opportunity to catch your eye, Sir Alan. However, I have a little sheaf of material on such matters through which I should like briefly to canter before proceeding to other amendments. The Committee will be relieved if I resist the temptation to refer to any hon. Member's intervention before those arguments have been reasonably aired.

We are talking about employers providing private medical insurance. It is important to place this debate in the context of subscriber numbers. The Committee will be very familiar—if it is not, it should be—with "Laing's Healthcare Market Review 2001–2002". [Interruption.] As Mr. Pound rightly observes, I am sure that his constituents speak of little else. He will probably be very familiar with paragraph 3.2 on the demand for private medical insurance and, indeed, some of the subsidiary paragraphs. [Interruption.] The hon. Gentleman says that it is the best paragraph. I am not sure about that; it is a copious document that contains many good nuggets, and I would not want to discriminate between them, except inasmuch as time requires me to focus on only a part of the report.

Paragraph 3.2 states:

"Demand for PMI, in terms of subscriber numbers, picked up in 2000 with the highest annual growth rate since 1990."

The significance of that is that, between 1991 and 1999, the growth trend in demand was fairly flat. Subscribers rose by 3.6 per cent. in 2000, following a fall of just under 1 per cent. in 1999. The important point is that the private health insurance market has struggled in relative terms—to some degree, it has struggled absolutely—in relation to individual subscribers.

We have witnessed strong growth in corporate business since 1997. That is relevant in the context of arguing for a modicum of tax relief in the corporate sector. There has been a substantial increase in the quantity of private medical insurance provided by the corporate sector. For example, since 1990—this has happened over a substantial period—the number of company-paid subscribers has grown by an estimated 23 per cent. A number of factors are commonly cited to explain that trend: the underlying strength of corporate economic performance; high employment and low unemployment; and strategic price discounting.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

No, I want to focus in particular on the factor of strategic price discounting, which is important and of which the hon. Gentleman will have a full and impressive grasp. The other factors include the increased concentration of marketing and, indeed, changing employers' attitudes to private medical insurance. We are talking about the use of strategic price discounting—in which I am encouraged to hear that the hon. Gentleman has a substantial interest—in the context of an increasingly competitive marketplace. That is what we now see. The review observes:

"Attitudes to PMI from employers may also be slowly changing as more employers are valuing employment benefits in general"— of which I know that the hon. Gentleman will approve—

"and are recognising the potential risks of losing employees for long absences through accident or sickness."

Photo of Mark Francois Mark Francois Opposition Whip (Commons) 6:30 pm, 10th June 2002

My hon. Friend makes the point that growth in private medical insurance has often been because of group schemes, which he is talking about in the context of employers who have participated in such schemes for their employees. It is also interesting that several trade unions, including those that oppose bringing further private capital into the health service, have private medical schemes of which they encourage their members to take advantage. Is that not a curious dilemma from the point of view of some Labour Members?

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

As so often over the years, my hon. Friend anticipates me. We have known each other as long as I have known the hon. Member for Bassetlaw. I shall not bore the House excessively on this matter, Sir Alan, as you would not allow me to do so, but I have jousted with the hon. Member for Bassetlaw since we joined Lambeth council together in 1986. It is fair to observe, however, in the context of the important point made by my hon. Friend, that he and I have also been jousting against each other—although we now do so together—since 1986, when we competed for the chairmanship of the Federation of Conservative Students. He was always more quick-witted than me at the time, and he clearly remains so now.

My hon. Friend alludes to an important point about the use of private health care by trade unions on behalf of their members and employees. I was tempted to focus for a little longer on "Laing's Healthcare Market Review 2001-2002", but the central point will be clear to the House: a substantial number of companies provide private medical insurance for their employees, and there is merit in the argument that, if they are doing that, they should not also be burdened with the tax hike that the Government wish to foist on them. My hon. Friend gently prods me to remember the importance and perhaps even the curious tension and inconsistency on the part of trade unions in relation to this matter. He has effectively fed me a bone, and he would be disappointed if I did not choose to chew on it. We know that trade unionists who are publicly critical of private health care have benefited from health care themselves or led unions that offer forms of private health care insurance. That is the point that he keenly picked up. In the context of the advocacy of relief for employers spending money on these matters, it is notable.

The Conservative party agrees with the Government that more money needs to be spent on health, but we disagree with their view that the NHS is the only mechanism by which to deliver that health care. That is why we have looked around Europe at alternative social insurance schemes.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I shall not give way to the hon. Gentleman just yet, Sir Alan, as I have had an instalment from him. It was stimulating, and I should like to store him up. It would be unfair to squander him at this relatively early stage, so if he can be patient I shall return to him in due course.

We have looked around Europe at alternative social insurance schemes and the work of a range of for-profit, not-for-profit and voluntary health care providers. In that context, it is interesting to focus, as I shall in a moment, on the attitude of trade unions to this important subject.

Photo of Michael Weir Michael Weir Scottish National Party, Angus

I was under the impression that most of these schemes also had an employee contribution. Nothing in the amendments affects employees who contribute to these schemes; only employers' contributions are involved. Is that deliberate or an oversight? Can the hon. Gentleman explain why he has gone down this route?

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

The hon. Gentleman makes an interesting point. As he will be aware, the bulk of the cost of the schemes in question is borne by the employer providing those schemes for the employee. The relief was therefore intended to be targeted on the employer providing the scheme and footing the bulk of the bill. If the hon. Gentleman is asking whether it is a fair point and factually correct that the employee bears some costs as well, the answer is yes. Our amendments, however, are focused on assistance in terms of national insurance contribution relief on the employer.

The Chairman:

Order. So is the clause.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

So is the clause, as you rightly observe, Sir Alan. I must therefore not digress, despite the temptations of the hon. Gentleman, who I know will have read the clause in detail. He is probably able to recite it word for word, unscripted, for the benefit of the House.

It is important to be specific, and I am keen to be so, if only hon. Members will allow me that opportunity, Sir Alan. Unison, for example, promotes its own health care scheme entitled Medicash. That does not win any prizes for originality but it does help members buy treatment outside the national health service. Specifically—this is interesting from the apotheosis of egalitarianism as represented by Unison—the Medicash scheme offers no fewer than three levels of cover: bronze, silver and gold. Members are offered a broad range of services and everything apart from overnight stays in hospitals can be bought from the private sector. Unison claims that Medicash—it is important to represent it fairly—

The Chairman:

Order. I am not at all clear that it is important that we should discuss in detail trade union arrangements. That seems to be outwith the scope of the amendment that the hon. Gentleman seeks to explain to the House.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I am always grateful to be guided by you, Sir Alan. If I am not entitled to develop the argument in detail in relation to the arrangements of particular unions, I shall refrain from doing so. I was enjoying developing the point, but I shall desist.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

Not for the moment. Suffice it to say that if a union is providing such a valuable benefit for employees, notwithstanding what it might say in excoriation of private health insurance and denunciations of those who support it, it seems fair that that union should be aware that it would benefit from the relief that the Conservative amendments would provide. I can summarise the point neatly, I hope, by saying that supporters in practice—whether or not in principle—in the trade union movement, as employers, of the provision of private health insurance, as represented by Unison and others, can rest assured that the Conservative Opposition see the merit of what they are doing for their employees. We would want, courtesy of these amendments, to provide relief from the damage and pain that the Labour Government's policy would inflict on them.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

The hon. Member for Bassetlaw has been very greedy, and I can indulge his greedy instincts not a moment longer. I shall give way, however, to Mr. Jones.

Photo of Kevan Jones Kevan Jones Labour, North Durham

I am grateful to the hon. Gentleman for giving way. I shall contact the general secretary of Unison about the hon. Gentleman's advocacy of that great union. Do not the schemes of Unison and many other trade unions cover dental care and other aspects of health care that are not necessarily covered by the NHS? As for what Unison and other trade unions such as mine—the GMB—advocate, the difference is that they do not favour a system whereby those in work pay through a national insurance contribution but if they fall out of work, they fall out of the system. They support a system in which delivery of health care is free at the point of need. Is the Conservative party now saying that it is against health care that is free at the point of need?

The Chairman:

Order. I listened to Mr. Jones, but I feared that he would tempt Mr. Bercow away from the straight and narrow. He did so, and I hope that the temptation will be resisted.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I am obliged to you, Sir Alan. As you know, there is no more partisan enthusiast for straightness and narrowness than I, especially when the gentle tickle of the rod of the Chair is felt on my back. I am very grateful to you, Sir Alan, and I will not misbehave a moment longer, despite the cheeky temptations of the hon. Member for North Durham.

I will now move at a modest pace to amendments Nos. 7 and 9, and I know that you, Sir Alan, will be excited, not to say delighted, at the prospect. Intellectually, these amendments can be grouped together. The arguments for amendments Nos. 6 and 8 are clear. The attempt has been made, with a good deal of wriggling and scraping of the bottom of barrels, to defend the unions, but we see the merits of the arguments in favour of those amendments even if Labour Members do not.

I wish to turn the Committee's attention to the Conservative party's desire—it is certainly not the desire of the Liberal Democrats—to support the self-employed. Amendments Nos. 7 and 9 are designed to do that by relieving the self-employed of the burden of the Bill's provisions that will increase costs. Specifically, we propose in amendment No. 7—amendment No. 9 is similar—that employers, when facing the secondary percentage, should pay the full percentage if they are not themselves subject to class 4 contributions. We specify that the 11.8 per cent.—the reduced percentage for employers who are self-employed—should be provided, and the proposed subsections (3) and (4) in amendment No. 7 make it clear that the reduced percentage that we are proposing would be available to employers who have a business turnover of less than £1 million per annum.

Labour and Conservative Members will realise that the proposal would cover a great many businesses with relatively modest turnover which will be hit if the Government get their way but to whose rescue the Conservative party is trying to come. The amendment would be of particular benefit to a number of unincorporated businesses, because it would offer the reduced rate of employers' national insurance contributions to employers who are themselves self-employed and hence subject to an increase in their class 4 NICs as well as in their employers' NICs. Subsections (3) and (4) in the amendment would target the relief at small, unincorporated businesses as an incentive to their continuing to employ people.

The case for our proposals is powerful and we have received considerable support from outside organisations that are shocked and infuriated by the provisions in the Bill and by much of the content of the Chancellor's Budget. When a small, unincorporated business has employees, the self-employed business person will be hit twice. It is interesting for my hon. Friends to note that, as I make the point that that self-employed business person will be hit twice, the new Chief Secretary to the Treasury—whom I warmly complimented on his justified and long overdue promotion—has slunk out of the Chamber. Well might he slink, because he is an extremely talented defender of his case—and no more obviously so than when the case that he has to defend is an extremely poor one. The track record speaks for itself, and I am not surprised that he has preferred other attractions to attending a debate that describes the damaging policies that it will now be his doubtful privilege to defend.

We are talking about self-employed business people hit twice by the NIC increases proposed by the Chancellor—first, on the costs of employing staff and, secondly, on their own income. As is perfectly proper in parliamentary debates, Labour Members very often cite cases from their constituencies to support their arguments. For example, the hon. Member for Bassetlaw—I must be careful not to provoke him unduly for fear of the consequences in terms of further dilations from him—will refer to people in his constituency who think that everything is absolutely magnificent. That will leave the rest of us to wonder what is in the water in Bassetlaw.

I think that it is right to deal with practicalities and to consider the specifics and details. An unincorporated business person who employs two staff each with an annual salary of £15,000 and whose own income after expenses is £17,500 will be personally £262 a year worse off because of the changes to national insurance contributions and other tax imposts contained separately in the Budget measures.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

The hon. Gentleman must restrain himself, then I will give way.

I compare the figures that I have just cited with those for an employee who earns £17,500 a year and who will be £158 a year worse off, or a self-employed person with no employees and an income of £17,500 who will be £100 worse off in 2002–04. I am itching to return to the thrust of my argument, but the House wants to hear the hon. Member for Bassetlaw.

Photo of John Mann John Mann Labour, Bassetlaw

I refer to the figures in the hon. Gentleman's first example, and ask him what the costs would be should that employer choose to go forward with private health insurance. Should the hon. Gentleman not have those figures to hand? Would it not be right to suggest that, according to BUPA's statistics, the minimum cost would be about £800 a year? That would be four times more than the employer will pay in national insurance contributions.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

If I can put it in the vernacular, I fear that the hon. Gentleman is spouting off the top of his head, with modest regard, if any, for the accuracy of what he described.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

No, I will not give way, and I make that clear beyond doubt. I always enjoying the inquisition of the hon. Gentleman, but focusing on the specific costs of a scheme that has not yet been introduced and for which approval from the Secretary of State has not yet been sought let alone provided is a trifle illusory on the hon. Gentleman's part. Depending on one's preference, the extremely detailed interest that he takes in the subject is either a tribute to his parliamentarianism or a commentary on what a sad anorak he is. I do not know the answer to that, but the Committee will form its view on the dilemma that I have just unveiled.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I admire the hon. Gentleman's diligence and I am impressed by the exercise that he is giving to his knee muscles, but I wish to make progress. There are other amendments to consider and other right hon. and hon. Members might wish to speak if any time is left. Massively though I enjoy my periodic skirmishes with the hon. Member for Bassetlaw, we should not be so self-indulgent as to imagine that the House of Commons consists of the hon. Members for Bassetlaw and for Buckingham alone. The hon. Gentleman must not forget constituencies beginning with the letter A—or indeed those beginning with the letters C to Z.

The Government's proposal is clearly a tax on jobs and an attack on the most vulnerable members of the business community. My hon. Friends and I have focused much in recent times on our championship of the vulnerable. The crusading theme of the leadership of the Conservative party by my right hon. Friend Mr. Duncan Smith is the absolute determination that a one nation Tory party should identify with, and champion the cause of, the vulnerable, the oppressed, the downtrodden and those who have been consistently let down and betrayed by the Government—who have been treated with indifference, disdain and contempt by a Government who fondly imagine that everyone in business and employing others is somehow wealthy and undeserving of the concern of a modern Government.

Our position is this. We are arguing for the relief for unincorporated businesses proposed in amendments Nos. 7 and 9 because 3 million self-employed business people have average incomes that are significantly lower than the average salaries of employees, yet the Bill effectively forces them to pay the NICs increase twice. We are trying to offer some relief and succour to the self-employed by exempting small unincorporated businesses—defined in the amendments as those with a business turnover of less than £1 million—from the increase in employers' NICs. That would help the self-employed—market traders, household decorators, builders, retailers and a plethora of others—to employ more staff, to keep the staff that they have, and to stay afloat despite the competitive pressures and Government imposts that rain down upon them. My hon. Friends and I are concerned about those people because we know what tough times they face and how difficult the climate is.

I remind Labour Members that our arguments enjoy the support of an organisation that toils effectively and creditably on behalf of the self-employed—the Federation of Small Businesses—and refer them to the comments of John Walker, its policy chairman, about the increased national insurance contributions that are expected from the self-employed.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

Yes, the hon. Gentleman will find that that is accurate. I know that—I would have a problem with my short-term memory if I did not—because I met the good Mr. Walker this morning. He explained to me, eloquently and in detail, the damaging effects of the Government's policy and the helpfulness of the amendments in offering relief to benighted businesses the length and breadth of the land.

Mr. Walker said:

"It is a tragedy that the Chancellor has decided that the self employed will also pay higher National Insurance Contributions. The average income from self employment is just £13,890 compared to an average income from employment of £21,842 per annum. This undermines any attempts the Chancellor has made to help the low paid."

If Labour Members do not see that as a faithful reflection of the legitimate worry of a representative of business who is concerned not with politics, but with the impact of policy on businesses and their staff, I do not know what will cause to be opened minds that are closed. I hope that the hon. Member for Preston is about to show me that his mind has opened.

Photo of Mark Hendrick Mark Hendrick Labour/Co-operative, Preston

It is kind of the hon. Gentleman to give way to me again. Does he agree that the figure of around £13,000 that he quoted is most likely to be the amount that many self-employed people are advised to pay themselves by accountants who look after their best interests, especially as regards income tax?

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

That is an interesting intervention, and I am sure that the hon. Gentleman will want to develop the point further. It is probably relevant, but it does not have a great impact on the thrust of the amendments.

This morning, I visited a business that would benefit from the amendments—the appropriately named Buckingham Coffee Lounge. It is appropriately named not only because it is near to Buckingham gate—it is situated at 19-21 Palace street, SW1, a short canter from the Palace of Westminster—but because I visited it as the interested Member of Parliament for Buckingham as well as in my capacity as a Treasury spokesman. I met Mr. Jose Pose-Silva, who is a member of the Federation of Small Businesses. He explained that the impact of the Government's NIC increase on an unincorporated business such as his will be to raise costs by about £500 a year. He faces paying £500 a year extra unless the Government are prepared to provide some relief. That is a regrettable state of affairs, and I should like it to be changed.

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster

My hon. Friend may be feeling some trepidation about having visited a business in my constituency without my consent. I hope that he took advantage of all that the Buckingham Coffee Lounge could give him not only in economic matters but in relation to its no doubt excellent products.

Is not the real concern that the measure will force many businesses that are happy to remain small and flexible as unincorporated businesses to incorporate in order to avoid such punitive taxes? Does not that go against the alleged highbrow pro-enterprise instincts of the Government? Under the current arrangements, companies can choose to avoid national insurance contributions by paying in the form of dividends instead of salaries. This is an absurd measure that will bring in no additional revenue to the Treasury.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I am obliged to my hon. Friend for providing that welcome and timely in-flight refuelling. I hope that he accepts my personal apology for having failed to inform him of my intended visit in advance, in accordance with parliamentary convention. I am grovelling to him, and I hope that he will excuse me.

As always, my hon. Friend makes a compelling point. The Buckingham Coffee Lounge is a small unincorporated business that is struggling to make its way, providing a decent service and trying to prosper. As such, it should be helped, not hindered, by Government. The best way to do so is to provide it with better tax treatment than it presently enjoys. Labour Members should go to the Buckingham Coffee Lounge. It provides an excellent service, and the gentleman who runs it would benefit from our policies and suffer from theirs. If they do not want to support policies that would help it, they should at least have the decency to patronise it.

Amendments Nos. 12 and 13 are designed to help personal service companies. Hon. Members will be familiar with the lengthy and detailed debates about IR35 that we enjoyed—if enjoyed be the word—during the previous Parliament.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I am disappointed that the hon. Gentleman's reaction to my reference to IR35 is to say, in an extremely distasteful and impolite fashion, "Oh God!" because these matters are of the gravest concern to many thousands of small independent contractors who have been hammered by this Administration. There may not be many such businesses in the hon. Gentleman's constituency, but if that is his attitude to them, I can only say that I have a more accommodating and respectful attitude to the businesses of Buckingham than he has to those of Ealing, North.

Photo of Steve Pound Steve Pound Labour, Ealing North

I was not speaking from any blasphemous origins, but merely out of deep regret and sadness. I was calling on the deity to intervene and redirect the hon. and bumptious Member for Buckingham (Mr. Bercow) back to the subject under discussion because his tour d'horizon of every health care provider in Europe and every coffee house in Westminster is exhausting the legendary patience of hon. Members.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury 7:00 pm, 10th June 2002

The hon. Gentleman must speak for himself. I happen to think that the impact of increased national insurance contributions is important and will be damaging. I am concerned that people who provide health care packages for their employees, people whose businesses are unincorporated and, indeed, people who are involved in personal service companies should be offered a ray of light at the end of the tunnel. The fact that the hon. Gentleman is prepared to compound and exacerbate the depredations that they have suffered from five years of a Labour Government, with further imposts contained in the Bill, does not surprise or impress me. Like my hon. Friends, I want to ease the plight of vulnerable businesses that create the wealth that the hon. Gentleman and his colleagues have an insatiable and legendary appetite to spend. I want those companies to have some hope.

We are not proposing to remove IR35. That would not be within the scope of the Bill and would not be permitted. The Professional Contractors Group is principally and legitimately concerned with that agenda. However, we are proposing to provide relief on the increase in national insurance contributions to benefit personal service companies. That is sensible. The amendments would exempt individuals who are involved in personal service companies from the increase in employers' NICs. They would still pay increased NICs as employees, but would not be penalised twice. That is fair, decent, right, proper and, if we persuade Labour Members to support us in the Lobby, will be effective.

Let us be clear about what will happen to personal service companies if they are not given the relief that we advocate: they will face big increases in costs. The cost of the Budget changes to a personal service company with an annual income of £100,000 will be £1,865. That is a big deal. It is an important subject and should not exhaust the self-proclaimed legendary patience of Mr. Pound or any other hon. Member. That is what we are here to debate. I look forward to hearing his well-informed, erudite and scintillating contribution.

Our amendments are good. We intend to press them to a vote. We look forward to hearing whether anyone from another political party supports them. I commend them to the Committee.

Photo of John Mann John Mann Labour, Bassetlaw

Having failed to intervene as many times as I wanted, I have several points to make. The blusterer from Buckingham masked the vagueness of his proposal while he meandered through alternative models of health care provision in Europe. We all know, however, that Germany takes a slightly higher percentage of gross domestic product in taxation than we do, and that in France it is 8 per cent. higher. The low taxation regime in this country and the reduction in the take from taxation contrasts with those western European models and, indeed, with the model when the Conservative party was in power from 1979 to 1997, when the percentage take increased by one third.

Mr. Bercow described me as an anorak—and it strikes me that anorak manufacturing might be a good small business for him to go into. While he was a special adviser—which I am sure has a lot to do with small business—some of us were taking risks in the business community, so we can speak with a modicum of knowledge. Ironically, and unfortunately for the hon. Gentleman, the first example that he gave—a three-person company—was precisely the type of company with which I was involved. Mine had similar salary levels and was set up in a similar way.

Had the hon. Gentleman bothered to listen to previous contributions or to read Hansard assiduously, he would know that the BUPA example that I used relates to a quote for the minimum cost that that organisation gave me three or four weeks ago. On average, private health insurance would impose on business a burden five times greater than the increase imposed by the change in national insurance contributions. The argument that the increase in national insurance contributions is a burden on business whereas private health care insurance would not be, is a fallacy that needs exposing. That is the American model rather than the continental model.

The hon. Gentleman used the words "pay twice". I was unable to intervene to demonstrate conclusively that the proposal is so vague that it is a case not of paying twice, but of paying somewhere between one and two times. I may be a new and inexperienced Member, but I know that the amendments that he has tabled to this important Bill are vague. They give no idea of what the payment will be, and we cannot judge what their impact on employers would be.

The hon. Gentleman compared his proposal with Liberal Democrat policies, but that raises the question: who are the official Opposition, with the Short money to do the necessary research? His flabby explanations show the paucity of his argument—and the vagueness goes even further.

When he was talking about the definition of health insurance the hon. Gentleman referred to trade unions, but he failed to explain that with most trade union health assurance policies the member pays a small amount to receive income when he is incapacitated, and in particular, when he is in hospital. Trade union policies are not about paying for private health care, but about getting payments into people's pockets when their wages are not being paid in full, or at all, by the employer.

Photo of Tom Harris Tom Harris Labour, Glasgow Cathcart

Does my hon. Friend agree that Mr. Bercow failed to mention that, in contrast to the spirit expressed in his amendments, even trade unions that offer private insurance do not come cap in hand to the Government for tax relief?

Photo of John Mann John Mann Labour, Bassetlaw

Indeed, I accept that point. However, the key issue is that the health assurance whereby individuals pay a premium to get income into their pockets when they are ill has nothing to do with private health insurance. The flabbiness of the definition—by the hon. Gentleman's own admission, it incorporates all the trade union schemes—leads to this question: what is the minimum level of private health insurance that would qualify?

As we all know, there is a wide range of types of health insurance. There are some whereby health care is paid for, with various exceptions. I was reading about an example of insurance under which one third of the cost is paid, and this morning I challenged a GP in my constituency who had a leaflet about that sort of insurance in his surgery. Not all the cost is paid, and the insurance is a halfway house—or we might call it a "third way" house. It, too, would qualify. Even worse, there are policies such as the trade union assurance schemes, under which nothing is paid. The service is provided by the national health service, but the tiny amount that somebody could have in their pocket when they were incapacitated in hospital would also qualify. It seems to me that there is a potential for scam in the system.

How do we define the percentage of employers who are involved? While the hon. Gentleman was a special adviser, I found in my dealings with employers, and in industrial relations, that the vast majority of schemes were for a section of the work force, not for everyone. Indeed, it was very rare for all the work force to be covered, although the senior management were usually covered. Sometimes, as quickly happened after privatisation of the utilities, the senior management and some of the middle management were given private health insurance as a so-called perk. The question of what qualifies cannot, therefore, be dismissed by saying, "This is like the Liberal Democrats ignoring Northern Ireland, and we can get away with it because the good ladies and gentlemen from the Clerk's Department have allowed it." This should be about policy making.

Photo of Mark Hendrick Mark Hendrick Labour/Co-operative, Preston

My hon. Friend is making an important point, which Mr. Bercow seemed to sidestep when I intervened. If the Opposition were keen for employers to take up private health insurance for all employees, and wanted all the firms in Britain to take it up, I could see some justification for the proposed exemption from the extra 1 per cent. charge. However, the hon. Gentleman is not saying that. He is saying that just because some employers look after some employees, it is a good idea for the Government not to ask them to make any further contributions in respect of other employees, and to encourage other companies to do the same. Does my hon. Friend not think that that is a dishonourable position?

Photo of John Mann John Mann Labour, Bassetlaw

I think that it is a muddled and confused hedge of a position. It is an attempt to give some spin to the outside world, the business community and the financial pages of certain newspapers, but the substance is missing.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I assure the hon. Gentleman that our position is not muddled, but his is assuredly disingenuous. Will he not honestly admit that he opposes any reduction in the national insurance burden borne by employers in respect of their employees if they choose to provide private health insurance? Can he not get his mind around the notion that, in respect of employees for whom an employer provides private health insurance, a respectable argument for a reduction in the NIC burden can be, and has been, advanced?

Photo of John Mann John Mann Labour, Bassetlaw 7:15 pm, 10th June 2002

Like the president of the Bassetlaw chamber of commerce, I should say that I am no longer an active director or participant in my company. I am merely a shareholder, so the so-called burden on business has only one direct impact on me: a potential minimal reduction in dividends year on year. As someone who has been prepared to take forward the entrepreneurial challenge of creating 1.5 million new jobs since Labour came to power in 1997, I have no problem with helping business. From a business point of view, however, the option of private health insurance is not financially prudent. As a shareholder, rather than an active participant or director, I will press my directors never to have the poor business acumen to throw money away precisely when this Government are building up the national health service, which is growing in exactly the way that any good business would wish it to grow—so as to give us a work force who are protected in sickness and a community and future work force who are healthier overall. That is exactly the politics of this debate.

I shall finish on the precise point about national insurance contributions with which the amendment deals. It is woolly and weak. It panders to posturing politics instead of providing an alternative. I think that it is disgraceful, as was the hon. Gentleman's contribution, because it failed to address any of the specifics. The difference between paying one or two times is a grey area, where we can pick and choose in any way we want. That is a bad way of making policy and legislating, and it is a shame that the official Opposition are reduced to taking such an approach instead of making a substantive proposal.

Photo of Adam Price Adam Price Plaid Cymru, Carmarthen East and Dinefwr

I shall confine my comments to amendment No. 15, which is tabled in my name alone but enjoys considerable support from Plaid Cymru and the Scottish National party. Hon. Members in all parts of the House will be relieved to know that I aim to make my comments a good deal more succinct than those of Mr. Bercow, whose speech was not so much exhaustive as exhausting. Nevertheless, we shall continue to support amendments Nos. 7, 9, 12 and 13, which support small business.

Our position in Plaid Cymru and the SNP has been consistent with what has been—certainly for the past hour—a long and arduous debate about the Bill. We believe that the provisions are necessary, but insufficient to meet the challenge that we face in revitalising our public services. The underlying motives are correct, but the means of the achieving those aims are not necessarily provided.

Our principal concern is enshrined in amendment No. 15. The use of employers' contributions as a mechanism for delivering new investment in public services is fundamentally flawed. As the Bill introduces a payroll tax, and as the public sector is the biggest employer in many—if not all—of our constituencies, it will reduce the positive impact of the extra resources going into health and social services. It will also exert additional strain on other parts of the public sector that have so far received no definite promise of extra funds.

As has been said on many occasions, the Government are giving to the cash-starved public services with one hand, but taking with the other. That is greatly to be regretted, especially in the context of what is already a difficult financial environment for public services. It is difficult for two reasons. First, there is the growing doubt about whether the Chancellor will achieve his forecasts for economic growth. We discovered during the recess, in figures from the Office for National Statistics, that the economy has been at a standstill since autumn last year, and is therefore teetering on the brink of recession. We now have the slowest economic growth in the G7.

Secondly, while economic growth has ground to a halt, which will have an obvious impact on the ability to deliver extra resources for the public sector, inflation in the public sector is also increasing apace. As we have heard from city analysts, including Michael Saunders of Schroder Salomon Smith Barney, public sector pay and input costs are increasing faster than those in the private sector because of pent-up demand. The worry is that the extra investment promised and so badly needed will be dissipated by a combination of lower economic growth and higher costs.

I mention in parenthesis that Wales and Scotland face the additional pressures of the Barnett squeeze, of which the Committee might not be aware. That means that the rates of increase in health expenditure will be lower in our two countries than in England. The figure for England will be 7.5 per cent., whereas for Wales it will be 6.8 per cent. and for Scotland 6.3 per cent.

It is in that context of doubts about the impact on public expenditure of lower economic growth and higher public sector inflation that we have to consider the proposal to increase public sector employer contributions. Our amendment is designed to ensure that we get the full benefit of the extra resources, that we get the full force of that benefit in years to come, and that we get the resources in early. In health, for example, we are aware that it takes time to train new nurses, doctors and consultants.

It is vital that we do not impose any impediment or additional constraint through the public sector employer contribution. In previous debates, for obvious reasons, we focused on additional costs to the health service resulting from the measure. The Library estimates a cost to the NHS in Wales and Scotland of an extra £37 million a year, and that money will come out of the NHS budget in Wales and Scotland. The cost to the NHS in England is estimated to be £205 million a year.

As a result of the Bill, that outcome will be replicated in other sectors that will not receive additional hypothecated funds, and as an internationalist I should point out that it will be replicated in England as well. For example, next year the further education sector in England will probably receive an additional £85 million, which is similar to this year's funding increase and represents about 2.5 per cent. extra in its annual budget allocation. However, according to the Department for Education and Skills, £25 million of that £85 million will be eaten up by the national insurance employer contribution increase, and because of additional charges for utilities and various other equipment costs, a further £25 million to £30 million will be needed simply to achieve a real-terms standstill.

That will leave a maximum of £35 million to cover pay increases, which will mean a pay award in the sector of only slightly more than 1.25 per cent. That is less than the headline inflation rate, for which the latest figure is 1.5 per cent., and far less than the average wage increase throughout the economy as a whole, which is about 4 per cent.

That will happen in a sector that is already experiencing considerable difficulties with pay agreements and pay differentials with teachers—and the problems in further education will be mirrored in secondary and higher education. Local government is experiencing similar problems: the Labour chair of the Local Government Association, Jeremy Beecham, has said that 80 per cent. of the additional money going into local government for social services will be eaten up by the increase in local government employer contributions alone.

That is why we, through our amendment, are attempting to provide some insulation for the public sector at a difficult time. We acknowledge and welcome the fact that in the Bill the Government have taken two steps forward, by recognising the need for extra investment and the need for taxation to fund it. Unfortunately, for two small steps forward they have taken one step back—or, as the accident and emergency consultant Peta Longstaff said during the post-Budget photo-opportunity for the Prime Minister and the Chancellor, the Government have scored an own goal by providing additional resources with one hand, but taking a substantial amount back with the other.

Unfortunately, by raising national insurance contributions as they have chosen to do, the Government have raised expectations but simultaneously limited the ability to deliver on them. Despite the long debate that we have had, it is inevitable that we will have to revisit the subject because of the hole in the Government's finances and the inconsistency in their thinking. We will have to continue this debate until we get an adequate solution for the public sector—one that does not give with one hand and take with the other.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

Mr. Bercow is a pleasant and eloquent man, but it is a pity when he speaks as he did when moving the amendment, because to speak at such length causes us to have a far more diffuse debate than we might otherwise have had about issues that are worthy of punchier debate. Sometimes, unfortunately, he wastes his eloquence. By contrast, the hon. Members for Bassetlaw (John Mann) and for East Carmarthen and Dinefwr (Adam Price) made speeches that were clear and to the point.

The hon. Member for Buckingham made significant points about his concern for certain businesses, and there are points of principle that should be addressed, especially those that relate to tax relief for businesses that pay for private health insurance. I hope that he will respond to some of the points that I make in that respect. The hon. Member for Bassetlaw raised some practical issues that make it difficult to see how such a system could work, but it is worth exploring the matters of principle as well.

If their amendment reflects the approach that the Conservatives have chosen to adopt, they have to say where it will end. It is reasonable to ask whether, if an employer decided that to attract highly sought-after staff who are often highly paid they would offer a contribution toward fees for private sector education, the hon. Member for Buckingham would advocate that there should be some remission of or exemption from income tax or corporation tax, which comprise the general pot out of which education funds are paid. Similarly, if an employer decided to give sick pay provision that was more generous than the basic statutory package, would he say that the employer should benefit from a reduction in tax on the ground that they should not pay twice for statutory sick pay provision that is paid for by the state through taxation? If a person did not use local schools or had long-term care insurance, should that person receive a deduction or relief on their council tax payments?

I contend that it would be difficult to argue both that the answer to those questions is yes and that we would still have a fair system wherein the better-off are engaged in state provision of a welfare safety net. If one believes that people should not pay twice, the better-off will be even more reluctant to pay tax at all and might be tempted to plough their own furrow, and that will undermine the tax base for important public services. That is an issue of principle, and it is important that the Conservatives make it clear whether that is to be their general approach.

In a similar vein, if a company did not provide a benefit—private health insurance—from its receipts, it may well be that it would pay tax on the money it used to do so. Therefore—I do not mean this in a derogatory way—the company might use the Conservatives' proposal as a way of avoiding paying a different tax. A relief on such a use of employers' funds might amount to a relief that is sought—or already achieved—by not paying a certain amount on profits or dividend payments.

As the hon. Member for Bassetlaw said, the extent of insurance is variable. In an intervention when the hon. Member for Buckingham was in full-on mode, I tried to make the point that—to use his terms—an employer pays private health insurance to ensure that their employee is available to work and doing so therefore contributes to their business. However, people who are off work sick often use primary health care provision or emergency provision, which are never covered by private health insurance schemes, or they may suffer from chronic illness, which is often not covered by private health insurance schemes. In that case, why should there be full relief?

Imagine two employees who are using an emergency service—an NHS intensive care unit or ambulance provision. One does not benefit from private health insurance, the other benefits from private health insurance outwith the particular health incident that has caused them to use the emergency service. If both employees are using the national health service, why should only the latter's employer receive some benefit? There is therefore a problem with this approach.

There is also an issue about fairness. Some firms provide private health insurance for all their employees from the cleaners upwards, but generally speaking, the hon. Gentleman will accept, private health insurance is a perk for the better-paid. He is therefore proposing a subsidy for people who are better-paid; it would not be directed at people on average pay or those who are less well-paid.

The hon. Gentleman may argue that his amendment provides an incentive that would encourage people to take out private health insurance; they would get the benefit of tax relief so, in some way, the amendment may reduce the pressure on the NHS. He did not make that point, but a similar point was made earlier about tax relief for better-off pensioners. However, he will know that elasticity in demand for private health insurance has not been demonstrated. Between 1990 and 1997, when tax relief for private health insurance for better-off pensioners operated, there was not a significant increase in the take-up of private health insurance so, if that was one of the aims of the hon. Gentleman's policy, it will not be delivered. He must deal with significant issues of principle; it is unfortunate that during such a long speech we were not able to intervene and invite him to comment on them.

The hon. Gentleman made some valid points about the burden of taxation on small businesses in amendments Nos. 7 and 9. He knows that I share his concern, which is why I should have preferred a tax rise for high earners with an income of more than £100,000 to a tax on employers, especially in small businesses, where the average take-home pay is £13,000 after, as he almost conceded, accountants' adjustments—that may not be a genuine figure for take-home pay. Nevertheless, I share his concern and I cannot understand why he does not feel that it is fairer to ask wealthy people earning more than £100,000 to pay more.

Mr. Chope, described 50 per cent. tax rates on income over £100,000 as obscene, which was the strongest term used by Conservative Front Benchers today and shows an imbalance in priorities; they are seeking to defend the better-off from what the hon. Member for Christchurch described as an obscenity rather than seeking to defend people who cannot get the health service that they need because of lack of funding. I return to the point that I made at the beginning of this afternoon's debate; the hon. Member for Buckingham is effectively offering tax cuts in his amendment to various parts of the business community. He did not say how he would pay for them, although he tried to explain why he did not do so; as yet, he does not have a policy to put before the electorate. However, it is not responsible politics to salami-slice the provision on tax-cuts, even in deserving cases, without explaining the way in which that would be paid for.

Photo of Mark Hendrick Mark Hendrick Labour/Co-operative, Preston 7:30 pm, 10th June 2002

I certainly agree with the hon. Gentleman's criticisms of the Conservative position. However, does he not agree that his own policies of clobbering people on more than £100,000 with a 10 per cent. increase—

The Chairman:

Order. We cannot go back to that as we are not on that amendment.

Photo of Evan Harris Evan Harris Liberal Democrat, Oxford West and Abingdon

The Conservatives must explain how they will pay for their proposal. In the previous group of amendments, we made clear the way in which we would have preferred to raise the money. However, having failed in our attempt to achieve that fairer method, we now face the question of whether the money should go to the health service or whether there should be tax relief for businesses. While we sympathise with businesses which have problems—the hon. Member for Buckingham knows that we share his view about the iniquity of IR35, on which our Treasury spokespeople have campaigned alongside his colleagues—funding has to go to the health service, which is why we cannot support his suggested tax reliefs.

Finally, the hon. Member for East Carmarthen and Dinefwr made some good points when speaking to his amendment. To a certain extent, using employers' national insurance contributions is self-defeating, particularly when social services departments have to pay more than they may get from the Government's disbursement of the receipts, which is why on Second Reading we said that it is vital that more of the money raised by the Bill goes to social services than is planned by the Government, otherwise they may not get any benefit and, indeed, are in danger of getting a net disbenefit. That situation has been created by the underfunding of other public services; we are robbing further education and police authorities, for example, to pay for the health service, which cannot be right. The Government should not look at each public service in isolation, but should recognise that there is still underfunding across the board. They should raise their ambitions for getting resources into public services fairly and announce changes, preferably before an election, to income tax. We therefore share the view of members of Plaid Cymru that income tax is the best way to pay for increased funding. The Government have missed the opportunity to tackle all those services, but it is not appropriate to go into that now. However, we cannot support the Conservative amendment.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

Mr. Bercow took 55 minutes to introduce his amendments. While they are important, I hope to be a little briefer in my response to them and amendment No. 15, which was tabled by Adam Price.

I shall deal with the amendments in the order in which the hon. Member for Buckingham introduced them. Amendments Nos. 6 and 8 cover private health care. Dr. Harris and my hon. Friend John Mann made some good observations about the problems of funding that, and the treatment that private medical insurance may or may not provide for, as opposed to the NHS funding that our arrangements seek to secure, such as the funding of primary care and emergency treatment.

The amendments are interesting, as was our debate and the enthusiasm with which the hon. Member for Buckingham introduced them. The House will realise that they provide the first hint of the Conservatives' intentions for the NHS and propose little more than a thinly-veiled subsidy for companies offering private medical insurance to their employees. That is not the most efficient way of trying to support the NHS indirectly, and it is certainly expensive. As the hon. Member for Oxford, West and Abingdon said, when the Conservatives introduced relief on private medical insurance for people over 60, between 1990 and 1997, there was precious little growth in the number of people who took out such insurance, although it cost the Exchequer £650 million. If we look carefully at the way in which companies operate, we see that private medical insurance is provided as a benefit; the company pays for a company policy, which usually means that large employers can negotiate such policies for groups of employees at a discount, whereas smaller companies cannot. The amendment would therefore help some, but not all, employers.

The Government reject the basic proposition that companies should receive payment for providing private health care. If companies decide to provide private medical insurance for their employees that is up to them, but the Government do not believe that the taxpayer should subsidise them for providing such insurance. We remain convinced that the best way to use the resources available is to provide for the health care of all residents in the United Kingdom by funding the NHS directly.

About 120,000 employers are already providing private medical insurance to about 1.9 million employees. They do that in the knowledge that they are still making as well a contribution to the NHS through employers' national insurance contributions. They have never suggested that because they are providing private medical insurance there should be a reduction in national insurance contributions. We know, because employers have repeatedly made the case, that they have a strong interest in a healthy labour work force. The CBI has made it clear that it is important to companies that they have an efficiently funded NHS to which their employees have access, a service that is comprehensive and available on the basis of need.

The hon. Member for Buckingham referred also to fairness. He talked about costs to employers. Let us take employer contributions to health care benefits for the year 2000–01. In France, an average employer will contribute about £58 a week. In the United States, it is £37.50. In Germany, it is £31, and in Britain, it is £9. Nine pounds contribute to a comprehensively available health service on the basis of need. The system ensures that employers get an extremely good deal.

The hon. Gentleman moved on to the self-employed when dealing with amendments Nos. 7 and 9. They are designed to help small unincorporated businesses. My problems with the amendments is not necessarily the intention that lies behind them, but the suggestion that contributions would not be made to the health service.

The Government have demonstrated time and again their ability to assist these very businesses, whether it be through reductions in the threshold for the reduced rate of national insurance or in helping the self-employed and service companies in taking forward their business. However, the amendments would give the self-employed further benefits in a system that would cost the taxpayer £450 million, and would give self-employed companies a greater benefit than they already have.

If we compare the national insurance contributions paid by the self-employed with those paid by employees and employers, it is estimated that the self-employed already under-contribute by about £2.4 billion. That figure takes into account the fact that the self-employed would have a reduced benefit position. The self-employed are already getting an extremely good deal from the national insurance fund. The hon. Member for Buckingham seeks to make everyone else pay for the service while suggesting that the self-employed should not.

The hon. Gentleman overlooks the fact that overall the self-employed continue to get an extremely good deal. How much would they pay in national insurance contributions on profits of £30,000 a year, and how much would an employee pay on earning that amount? The hon. Gentleman also overlooks the fact that the national insurance contributions of an employer who is self-employed are deductible from his profits and gains. That deduction reduces their class 4 liability. Such employers already have an advantageous position in the national insurance system. Through the amendment the hon. Gentleman seeks to reject the basic principle that all of us should contribute something to assisting growth and investment in the NHS.

I move on to the amendments that relate to service companies. These amendments seek to ensure that a one-person service company with a turnover of less than £1 million should pay employers' national insurance contributions at the old rate of 11.8 per cent. rather than the proposed new rate of 12.8 per cent. The amendments may be intended to apply only to those service companies that come within the legislation on service companies that is commonly referred to as IR35. However, the hon. Gentleman does not define the term "service company". There is not such a definition in legislation. The amendments as drafted would allow a huge number of firms that he would not intend to have relief to have access to it. Drafting problems aside, we do not believe that the intended objective is appropriate, and I shall briefly explain why.

We introduced the service company legislation to address a specific unfairness in the tax system. Put broadly, the legislation ensures that someone who works through a service company or for an intermediary, such as a partnership, but who is otherwise no different from a conventional employee, pays broadly the same tax and national insurance contributions as an employee. That means that anyone choosing to work through a service company, but otherwise working in a way that makes them no different from a directly employed employee, will pay essentially the same tax and national insurance contributions as a direct employee.

The hon. Member for Oxford, West and Abingdon went on about fairness, equity and progression. Yet he objects to the idea that people in the workplace who are in exactly the same working position as others should be able to play with the tax rules to ensure that they pay less than somebody working alongside them.

It is important to recognise that in the working arrangements in service companies, there are two separate and distinct legal bodies. There is the service company as the employer and the person employed by it who is on PAYE. Each is a separate body and each has their own rights and responsibilities and access to different parts of the tax system.

Where someone chooses to be employed in a service company, that company will have full employer responsibilities, and that includes the 1 per cent. increase. I do not believe that it is fair or appropriate to say that those service companies as employers will not be expected to discharge their responsibilities. The amendments are a sop to try to find as many Trojan horses as possible to come into tax legislation so that employers in future will not have to pay their contributions. That is not acceptable. I ask my right hon. and hon. Friends to vote against the amendments. They are about breaking the principle that all of us, employers and employees, should make a contribution to the NHS.

The hon. Member for East Carmarthen and Dinefwr talked about the public sector. Amendment No. 13 provides that we excuse public sector employers from paying the 1 per cent. national insurance contribution increase on employee class 1 secondary NICs. I will not detain the House because I know that the hon. Gentleman spoke specifically about the principle for the public sector. That being so, I will not go into the fact that the amendment does not cover Northern Ireland, for instance. There are other rather important points. Effectively, however, the amendment suggests that we should excuse the Government and other public bodies from making their own employer contributions.

Although the Government believe firmly in the public sector, we do not think it should be treated as a special case in terms of national insurance contributions. We believe that public and private sectors should be on a level playing field. Let me add that trying to agree on a definition of a public-sector company could lead us down some difficult and complex routes.

It would be strange to suggest that public-sector employers should not be subject to the same requirements as all other employers, but I think that the hon. Member for East Carmarthen and Dinefwr made a genuine point about future investment in all our public sectors. Let me say this to him. The increases in national insurance contributions must be set against a background of high levels of growth in spending on key services. Spending on services will be £19.5 billion higher in 2003–04 than in 2002–03, which is itself a substantial increase.

I think it entirely wrong, in terms of principle, to try to distinguish the responsibilities of employers by virtue of whether they belong to the public or the private sector. Whichever sector they are in, employers have responsibilities in regard to their employees, not just in national insurance but across the board. It is dangerous to suggest that we can somehow make an exception in the case of national insurance contributions.

We are discussing a proposal in the context of wider spending on public services. No doubt the hon. Gentleman will want to pursue his point in the future—indeed, he said that he would—but if he presses his amendment I will have to ask my right hon. and hon. Friends to oppose it. I hope that, as the principle has been given a good airing, he will decide not to do so.

If any of the amendments are put to the vote, I shall ask my colleagues to oppose them.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury 7:45 pm, 10th June 2002

I am mortified that the Paymaster General has not been persuaded by the quality of the amendments.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

I am grateful to the Paymaster General for that, but apparently she was not quite persuaded. Methinks, Sir Alan, that she doth protest too much.

When there was some incentive for the provision of private medical insurance for pensioners, there was also some increase in take-up. Since the vicious and unnecessary removal of that tax incentive, we have seen the damage that has been done: people who benefited from the provision and afforded the insurance have since been unable to do so. We were offering some encouragement to employers providing private medical insurance packages for their staff. As Labour Members know, the atavistic hostility to that incentive was plain for all to see.

We were in favour of helping unincorporated businesses suffering under the heavy, and increasingly heavy, burden of taxation imposed by this Government. The Paymaster General made it abundantly clear that she did not sympathise, that she thought that those businesses already had it very easy, and that she did not want to assist them. We wanted to help personal service companies, but she did not.

I am very disappointed, and we intend to press our amendment to a vote.

Question put, That the amendment be made:—

The Committee divided: Ayes 126, Noes 338.

Division number 256 Orders of the Day — National Insurance Contributions Bill — Clause 2 — Secondary Class 1 contributions

Aye: 126 MPs

No: 338 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

I beg to move amendment No. 10, in page 3, line 3, at end insert—

'provided that, in respect of employees of pension age or over at the beginning of the year of assessment, the secondary percentage shall be 11.8 per cent.'.

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

With this it will be convenient to discuss amendment No. 11, in page 3, line 14, at end insert—

'provided that, in respect of employees of pension age or over at the beginning of the year of assessment, the secondary percentage shall be 11.8 per cent.'.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

During the earlier part of the debate, the Government said that it would not be fair if pensioners were penalised as a result of the Bill. The amendment would ensure that pensioners would not by being employed attract an additional 1 per cent. levy for their employers. It would also—I hope hon. Members on both sides of the Committee will support this—give a modest but important encouragement to employers to employ people of pensionable age.

There is an increasing feeling that age discrimination operates in the employment market. We know that those who are of pensionable age wish—[Interruption.]

The Second Deputy Chairman:

Order. There are general conversations throughout the Chamber. It is important that the Committee listens to the hon. Gentleman.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

Thank you, Sir Michael.

It is important that the Committee should address seriously discrimination in the employment market. It is increasingly necessary for many pensioners to try to obtain employment to make ends meet. It is a separate hobby horse of mine, but as a result of successive increases in council tax far in excess of inflation, an increasing number of pensioner households are in financial difficulties. To an extent, people below pensionable age who are in financial difficulties can use the labour market and change jobs, or at least get themselves in employment, but that option is not so easily available to pensioners. The amendment would give a modest incentive to employers to take on people of pensionable age.

In the past, when this issue has been raised the Government have been dismissive. They have argued that the income from employers' national insurance contributions pays for many other services, including—but not exclusively—pensions. They have also argued that the principle that people who are self-employed or not employed should not have to pay class 1 and class 2 contributions after they reach pensionable age should not be extended to their employers.

The Bill hypothecates the proceeds of such charges to the national health service, but elsewhere in the Bill the Government have accepted the argument that it would be unreasonable to expect pensioners to contribute to additional costs in respect of the health service. That is why the hon. Lady rejected the argument advanced by the Liberal Democrats, who wanted to raise the money through income tax—a move that would clearly affect pensioner income from investments. Such income is exempted under the terms of the Bill, because the insurance charge falls only on the earnings of employees below pensionable age.

When, on behalf of a constituent, my hon. Friend Mr. Atkinson raised the issue in correspondence with the Paymaster General last year, she replied:

"The National Insurance scheme is a social scheme. Amongst other things, its purpose is to fund the payments of contributory benefits such as Retirement Pensions, widows' benefit and incapacity benefit."

However, the provisions in the Bill are designed expressly to fund the health service. We have argued that the amount that the Bill will yield will greatly exceed the additional sum that the Government say they will give to the health service, but be that as it may. In my submission, the Paymaster General's argument against exempting men over the age of 65 from having to suffer employees' contributions does not wash in the case of a specific policy that is designed to fund the health service.

In the letter to which I have referred, the Paymaster General says:

"there is no comparable age restriction on employers contributions and the liability continues whilst the employee is working and earning over the threshold for paying contributions. I must point out that if the liability were removed, then younger people could be discriminated against and it could result in a situation whereby some employers may actively seek to recruit employees in this category."

However, the amendment presents a useful opportunity to give a modest but significant incentive to employers to take on senior citizens as employees. By so doing, they would save themselves 1 per cent. of the employer's costs.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

My hon. Friend mentions a Member of the House who is of retirement age, and who could be employed by the Government. The provision could indeed provide a modest saving for the Government and the parliamentary authorities, but, with respect to my hon. Friend, that is not the strongest argument for it. Many pensioners would like to have jobs but cannot get them. The amendment would enable them to say to an employer, "If you take me on your books, you will save 1 per cent. of payroll." It is a modest measure, and I hope that it will find favour with the Government and with the House.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury) 8:15 pm, 10th June 2002

It seems that the Conservative party's clarion call at the next general election will be, "Force pensioners to work after 65 by making them cheaper to employ than anyone else in the labour force." That is the only point that we could possibly glean from that rather potty introduction to the amendments.

The national insurance increases proposed in the Bill spread the burden of paying for the improvements in the health service that we all—or most of us—want as widely and fairly as possible across employees, employers and the self-employed. The amendments deal specifically with the contribution of employers, and propose that they pay a different national insurance contribution—even though the level of earnings is exactly the same—by using a definition of age. That proposal is made by a party that normally complains about increased complexities, form filling and difficulties in policing the borderline.

Under the proposal, an employer would pay a national insurance contribution of 12.8 per cent. on the earnings of a male employee aged 64, but in respect of a male employee aged, say, 65, the same employer would pay an 11.8 per cent. contribution on the same earnings. That appears neither logical nor fair, even when measured against the Opposition's apparent new objective of dealing with labour shortages in the British economy by forcing pensioners back into the labour market, even if they do not want to go.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

The Paymaster General thinks that the proposition is unfair, but in what way is it fair to require an employee aged 64 to pay the additional contribution, but not an employee aged 65?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

If the hon. Gentleman knew anything about the national insurance fund and the decisions that his Government took in 1995 on the movement in retirement ages and the complex link with the contributory system, he would understand exactly why such measures were introduced. If he was so concerned about the issue, why did he not deal with it when in government? Indeed, I think that he was even a Minister at one stage. As he well knows, under the agreement to phase in equality of age of retirement, the particular point that he identifies will move out of the system in respect of employees. However, he is in fact proposing that we add an extra layer of complexity to employers' national insurance rates.

The amount of secondary class 1 national insurance that employers are liable to pay is based on the level of their employees' earnings. Introducing a different secondary rate that depends not only on employees' level of earnings but on their age adds a complexity that simply is not necessary. It does not follow that excluding pensioners from paying national insurance means that employers should not pay their extra 1 per cent. national insurance on the earnings.

Under the existing structure of the national insurance fund, employers contribute at the same rate for all of their employees. The Bill maintains that principle. Employers recognise that it is in the interests of employers to have a healthy labour supply. They do not say, "Except when the person who is employed gets to 65, when we do not need to contribute to the health service through the national insurance system." Employers recognise that all their work force will benefit from the additional investment in the NHS.

I do not believe that the amendments would make pensioners more attractive to recruit. Even after the 1 per cent. increase in employers' national insurance, employers in the UK will still be paying less than employers in France and Germany towards their employees' health needs. Pensioners have demonstrated that they can, when they choose to and want to, compete in the labour market on equal terms and be judged on their skills and the experience that they offer the employer.

There is absolutely no basis in logic for saying that the employer has a lesser obligation to the contributions to the national insurance system simply because of the age of the employee. I ask the House to reject the amendment, not only because it would introduce complexity for employers, but simply because it is extraordinarily naive and wrong in the distinction it seeks to make about the obligations that employers have to employees, regardless of their age.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

These amendments are possibly the most bizarre of the evening. It is unclear why they have been tabled. Probably the original thought was that pensioners were exempted from national insurance, so perhaps employees should not pay for pensioners. However, the employer is getting the benefit of the financial contribution that the pensioner makes. It is frankly insulting if the implication is that someone who happens to be of pensionable age is making less of a contribution to the employer and that, therefore, in effect, a subsidy has to be paid for their employment.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

It is the only possible implication of the policy. Why else should there be such a differential?

Alternatively, it may be that the Opposition believe that, in some sense, there is a need to pay a cash incentive to employers to seek to employ or to keep in employment pensioners. But that is also extraordinary; again, why should businesses not wish to employ pensioners if they can make a good contribution and wish to work with them? The only possible conclusion is that, in some sense, the Conservative party believes that pensioners are less able, simply because of their age, to make a good contribution to business. The Conservative party has failed to think it through, and the uncertainty with which the argument was advanced from the Conservative Front Bench rather reinforces me in that view.

As we have made clear, Liberal Democrats would not have chosen employers' national insurance as our route for raising money for the NHS and we have explained the alternative mechanism. The amendment is an entirely unthought-through salami-slicer. It does not make sense, it does not add up, it is not helpful and I would be surprised were the Conservative party to press it to a vote.

Photo of Mike Hancock Mike Hancock Liberal Democrat, Portsmouth South

I thank my hon. Friend for giving way.

Photo of John Bercow John Bercow Shadow Chief Secretary to the Treasury

The hon. Gentleman has only just wandered in.

Photo of Mike Hancock Mike Hancock Liberal Democrat, Portsmouth South

No, I have been listening to the hon. Gentleman for the last two hours on television, and riveting stuff it was. I ask my hon. Friend to allow Tory Front Benchers to intervene on him to clarify their position, or maybe to help them out of the hole into which they have dug themselves.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

Conservative Front Benchers have popped up and down this evening with their usual gusto, but not on this issue. I did not intend to argue on this case for long, as it is poverty-stricken.

On reflection, the Conservatives will regret tabling an amendment from which the only possible conclusion that can be drawn is that they believe that pensioners have to be subsidised to work in business. In the process, once again, they are denying the NHS an unquantified amount of money for doctors and nurses that those pensioners and everyone else in the country desperately want to see in the NHS.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

The hon. Gentleman says that he wishes to remove totally this new impost on employers. I have tabled an amendment that would remove it from employers of people who are over pensionable age. He argues that those employers should have that impost. There is nothing consistent about his argument.

I wish to refer to a letter that I received from an individual. It says:

"My wife and I are still very busy with our little travel agency which is run as a limited company with our owning 100 per cent. of the shares. Although I am now 81 years old, I still work full-time as a director of the company. Unfortunately, I find that the company is paying an NHS surcharge on my salary which is a burden in these difficult trading times."

The surcharge at the moment is 10 per cent.; under the Bill, it will go up to 11 per cent. That individual is aged 81 and his wife is of a similar age. As the company is 100 per cent. owned, he finds that the additional burden will be borne by him, as the owner of a company, in circumstances where, were he an employee, he would not have to pay the new contribution. That is the principle.

Once again, we on the Conservative Benches are arguing for the small business person who is working and serving this country by working beyond pensionable age. The Government have made the spurious argument that the amendment will introduce extra complexity. However, the amendment seeks not to extend that complexity to those who are employed beyond the age of 65.

The amendment is a modest measure and I am disappointed by the Paymaster General's negative response. The weakness of her argument has reconfirmed for me the strength of the message that we are sending. I am sure that we will wish to return to this as an increasing number of pensioners ask why employers should be penalised for the fact that they are on the books of employers and are of pensionable age. Should they not have a similar benefit to those who are employees of pensionable age?

This is an important issue of principle that is well worth putting to the vote and testing the mood of the House on. I hope that the Government will, in due course, accept our arguments even though they have not done so this evening. Certainly nothing in this amendment will try to force people to work after the age of 65, although as a result of the increases in council tax, an increasing number of pensioners are finding that they do have to work after 65 to pay those taxes.

Question put, That the amendment be made:—

The Committee divided: Ayes 123, Noes 337.

Division number 257 Orders of the Day — National Insurance Contributions Bill — Clause 2 — Secondary Class 1 contributions

Aye: 123 MPs

No: 336 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

It being after 8.30 pm, The Chairman, pursuant to Order [13 May], put forthwith the Questions necessary for the disposal of the business to be concluded at that hour.

Clauses 2 to 8 ordered to stand part of the Bill.