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National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill

– in the House of Commons at 2:13 pm on 30th April 2019.

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Second Reading

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary 2:23 pm, 30th April 2019

I beg to move, That the Bill be now read a Second time.

This is a small and narrowly drawn, but nonetheless important, Bill. It aims to provide a welcome simplification of the tax treatment of termination awards and sporting testimonials. The corresponding rules determining the income tax treatment of termination awards and sporting testimonials were legislated for in the Finance Acts of 2016 and 2017. At that time, it was made clear that we would return and replicate those rules in national insurance legislation in due course, to ensure that there was not a persistent misalignment. Implementation of the measures in this Bill will replicate those rules in national insurance legislation. By the nature of national insurance, it is required to have a separate piece of legislation from the Finance Bill.

These measures were first announced at Budget 2015. They were then consulted on and published in draft in December 2016. They were subsequently reconfirmed at Budget 2018, so it is reasonable to say that they are expected by those affected and have been subject to much scrutiny. Together, they mean that a 13.8% class 1A employer national insurance charge will be applied to income derived from termination awards and sporting testimonials that are already subject to income tax.

Let me first set out the measure that covers termination awards. Between 2013 and 2014, the Office of Tax Simplification reviewed the tax treatment of employee benefits and expenses. The OTS published an interim report in August 2013 identifying termination awards as one of a number of priority areas. It found that relatively few employers and employees properly understood the regime. There was confusion, and the regime was therefore ripe for reform and simplification.

The OTS specifically identified three areas of misunderstanding on which it recommended we take action. First, certain forms of termination awards are exempt from employee and employer national insurance contributions and the first £30,000 is free from income tax. However, there is a common misconception that the first £30,000 of any termination payment is automatically tax free. Secondly, many employers believe that this exemption applies where in fact it does not, and thirdly, employers are unaware of the different income tax and national insurance treatment of termination payments.

Following the OTS recommendations, the Government announced at Budget 2016 that they would be reforming the tax and national insurance treatment of termination awards. As I said, the reforms to the income tax treatment of termination awards were legislated for in the Finance (No. 2) Act 2017 and took effect from April 2018. The Government confirmed at Budget 2018 that the associated reforms to national insurance legislation would be in place for April 2020. However, the fact that termination awards are currently subject to different income tax and national insurance treatment has created confusion, and that is what we are attempting to deal with today. Moreover, the current misalignment incentivises an admittedly small number of well-advised employers to disguise final payments as compensatory termination awards that benefit from a national insurance charge exemption. These reforms will close that loophole.

The Bill will place a 13.8% class 1A employer national insurance charge on income derived from termination awards on amounts over £30,000. However, I want to assure hon. Members that, when it comes to employee national insurance, these payments will remain entirely exempt. We have chosen to continue to ensure that employees will not face any additional liability as a result of these changes in terms of employee national insurance. This measure will raise around £200 million per annum for the Exchequer, which will make an important contribution to our public services. As this is a Budget measure, this sum has already been reflected by the Office for Budget Responsibility in its projection for the public finances.

Let me turn to the second measure in the Bill, which deals with aligning the employer class 1A national insurance treatment of income from sporting testimonials with the income tax treatment. As many hon. Members will be aware, a sporting testimonial is a one-off event—or series of related events—held on behalf of sportspeople who have played for a certain club for a long time. This often takes the form of an exhibition match involving famous players from the past and present. The testimonial can be used to raise money for the sportsperson before retirement, or sometimes to raise money for charity. The relevant income tax changes were debated and came into force from April 2017. As stated at the time of the Finance Bill—later the Finance Act 2016—the rules governing sporting testimonials are now changing to give clarity to the national insurance treatment as well.

Currently, when a sporting testimonial is non-contractual or non-customary, it can be organised by a third party, rather than the club or employer, to raise money without it being subject to NICs. Where the employer arranges the testimonial, or if it is part of the contract, or if there was an expectation that the sportsperson would be entitled to one, the testimonial is already subject to income tax and NICs.

Photo of James Cartlidge James Cartlidge Conservative, South Suffolk

Is there a sense of how common it is for a testimonial to be contractual? We all know that it is commonplace in cricket and football for players to have testimonials or similar events, so one assumes that most of them are contractual.

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

My hon. Friend makes a good point, and our analysis is the same. Last year, only around 220 sporting testimonials of any kind took place in the United Kingdom, and a large number will have been contractual. Certainly, the highest-profile ones, such as those of premiership footballers or leading cricketers for significant county clubs, are usually contractual. As I will go on to say, because the measure has a one-off £100,000 threshold during the career of the sportsperson, a large number of those 220 testimonials will fall below the threshold. Less high-profile sportspeople, who will perhaps have lower earnings, are likely to be within the threshold. We are talking about a small number of relevant testimonials and, as hon. Members will see in the Bill’s accompanying documents, the measure will raise a negligible sum. Our motivation is primarily the simplification of the tax system and the avoidance of doubt for sportspeople and those advising them, rather than to increase revenue materially.

Photo of Rebecca Pow Rebecca Pow Conservative, Taunton Deane

The Minister is making a clear point. I want to speak mainly for the cricketers of Somerset County cricket club, and I declare an interest here, because my husband, who is an auctioneer, has helped to raise money at many of their testimonials. A testimonial can make an important contribution to a player’s salary, especially those who have played for a long time. Will the Minister clarify that the legislation will clear up the situation, which does seem somewhat confusing? We do not want players to feel hard done by, but we have to take the right amount of tax and we must be fair. Will he also clarify that the proposals are fair and that players who may earn less will not be jeopardised?

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

Yes, and I must also declare an interest as a member of Nottinghamshire County cricket club. We have given the matter a great deal of thought. The proposal was raised several years ago, as I said, and we consulted at that time with the sporting bodies, including the England and Wales Cricket Board. It was my right hon. Friend Mr Gauke, then the Financial Secretary to the Treasury, who discussed the matter with the cricketing bodies. When the proposal was first brought forward, the threshold was £50,000 but, having spoken with the sporting bodies, we made the decision to increase it to £100,000, making it significantly more generous and allaying some of the concerns that my hon. Friend Rebecca Pow sets out.

Photo of Vicky Ford Vicky Ford Conservative, Chelmsford

I just wanted to declare an interest as a member of Essex County cricket club. I thank the Minister for supporting cricket.

Photo of Lindsay Hoyle Lindsay Hoyle Deputy Speaker and Chairman of Ways and Means, Chair, Panel of Chairs, Chair, Standing Orders Committee

That is not a problem as long as we do not forget the great county of Lancashire. [Laughter.]

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

Very good. I re-emphasise that not only is there a £100,000 threshold, but that this is about fairness. All sportspeople who have a contractual right to a testimonial, which is commonplace, will have been paying income tax and national insurance on the benefit from that for some time, so this measure merely provides a greater degree of certainty and fairness. Of course, some of the clubs organising such testimonials will be smaller, or they may involve testimonial committees, so providing them with the clearest possible advice will be helpful. It will also ensure that there is no doubt in their minds when doing a good thing that is in the interests of players who may be at the end of their careers or may have been injured prematurely.

From April 2020, non-contractual and non-customary testimonials arranged by third parties will now be subject to NICs above a £100,000 threshold. A third-party testimonial committee will be liable to pay the class 1A employer NICs charge on the amount raised above £100,000. These types of testimonials will not be subject to employee NICs to ensure that the sportsperson is not adversely affected. Again, as with the termination awards measure, we have chosen to act in relation to employer national insurance contributions, not employee contributions, so there remains a benefit to individuals in that respect.

I reassure hon. Members that the vast majority of sportspeople will be unaffected by the Bill because they will not exceed the £100,000 threshold. As I have said, Her Majesty’s Revenue and Customs estimates that only around 220 testimonials occur each year, most of which will remain unaffected as they either fall below the £100,000 level or are part of a previous contractual arrangement, which is commonplace in most sports.

Although the measure will bring in negligible revenue—we estimate less than £3 million a year—its value comes in the alignment and simplification of the tax and NICs treatment of sporting testimonials and clarity for those taking part in testimonials or those on sporting testimonial committees. Sporting bodies and other relevant stakeholders are expecting the changes, because our intention to make them has been known since at least 2015. As the changes required an NICs Bill, there has been a short delay, but that is what we are attempting to do today.

In conclusion, it may be a small and narrowly drawn Bill, but it is none the less important and includes two measures that simplify our tax code. Like many right hon. and hon. Members, I would like greater simplification of the tax system, but that journey must begin with single steps, and we are taking one of those today in simplifying the tax code in two significant respects that will have real-world consequences for individuals, who will benefit from a simpler system. The Bill will also raise a significant sum for public services and support our continued efforts to improve the public finances. It brings the national insurance and tax treatment of termination awards and sporting testimonials into closer alignment, and I commend it to the House.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury 2:37 pm, 30th April 2019

The condensed national insurance Bill before us is a shadow of its former self. I would have liked to be able to say that I was bowled over or knocked for six by the Minister’s speech, but there were more own goals than anything else. It is far from the extensive Bill that was promised by the Chancellor’s predecessor at the 2016 Budget, which included the Conservative’s 2015 manifesto pledge to abolish class 2 national insurance contributions. Instead, that manifesto pledge, like many of the Government’s promises, has quietly been sent to the landfill, barely even being recycled in this five-clause Bill. As for scrutiny, we have not even been able to amend the last three or four Finance Bills, but I am pleased that we will have an evidence session in Committee. I will be grateful for small mercies because we may be able to tease matters out a little more.

The cannibalisation of the national insurance Bill, which has been driven by the Chancellor’s volte-face on a tax cut for 3 million self-employed workers, reflects once again why the Conservative party has long ceased to be the party of the self-employed in particular and business in general. To many observers this will be viewed as another missed opportunity—one of the many opportunities that this Government have missed—to seriously address the relationship between the growing levels of self-employment in the UK and the levels of taxation and national insurance contributions that are paid.

The rushed timetable of this Bill has shown, once again, the Government’s complete lack of respect for parliamentary convention and the procedures of this House. The Opposition were notified only last Wednesday of the Government’s intention to timetable the Bill’s Second Reading, with an updated version of the Bill published last Thursday. The Government do not know one day from the next, although they do try to live from one day to the next. They gave parliamentary colleagues just one sitting day to examine the content of the Bill before today’s debate. The Government might not take their legislative responsibilities seriously, but the Opposition do.

Of course this is nothing new. Members have become accustomed to the Government’s handling, or mishandling, of legislation. The Government are engulfed in chaos and infighting on Brexit, and The Times reported yesterday that their rushed introduction of this hollow, some may say vacant, Bill is a further desperate attempt by the Prime Minister to keep this zombie Parliament in session.

Unwilling to face the electorate and unable to bring her dead-in-the-water Brexit deal back to Parliament for the fourth time, the Prime Minister is attempting to pack parliamentary business in the hope of avoiding an early Queen’s Speech that would no doubt be opposed by the DUP and her own Back Benchers. This is a new embarrassing low for a Government who are all at sea. It is high time that the Prime Minister did the honourable thing and set a date for a general election and her departure. We have a kakistocracy dressed up as a Government.

The Bill is comprised of two key measures: the introduction of a new national insurance contributions charge for employers on the taxable element of termination payments above £30,000, as the Minister set out; and the introduction of a national insurance contributions charge on income from non-contractual sporting testimonials over £100,000.

The new class 1A employer NICs charge will be levied at 13.8%, if I understand it, and its introduction will align the NICs treatment of termination awards and income from non-contractual sporting testimonials. On the face of it, the Minister would have us believe that these changes are technical and benign. However, there is nothing technical about fundamental changes to the treatment of termination payments either for the employer paying them or for workers facing redundancy, who regard this final payment as an evaluation of the work they have done for their employer.

Termination payments, therefore, have both an emotional and a financial significance, and the amount awarded is often determined by painstaking and careful negotiations between managers and trade union representatives. A good employer might offer a generous termination payment to an employee as a sign that, even though they have had to make them redundant, it is not a judgment on the intrinsic worth of staff who are leaving.

However, a likely by-product of the Government’s proposed employer NICs charge is that it will incentivise employers to reduce the level of non-statutory termination payments to employees so that the overall level of non-statutory payments declines. This will diminish the level of termination payments available to workers who lose their job, while increasing the amount that the Government receive in NICs receipts.

The tax information and impact note for this measure goes to great lengths to clarify that this new charge will be limited to employers, and the Minister asserts that the Government have no plans to make further changes to the £30,000 statutory threshold, yet the Government’s own policy note states that this additional cost for employers will be reflected in lower wages.

The Office of Tax Simplification, which the Minister mentioned, noted in 2015 that imposing tax and national insurance contributions on all termination payments is

“likely to have a significant cost impact for some people, particularly those lower paid employees who may…often be the ones receiving smaller termination payments”.

Despite the clear impact that this measure will have on workers and employers alike, the original consultation noted that the Treasury had failed to undertake a distributional analysis of the impact of this new charge. With that in mind, will the Minister confirm whether, a few years on, that remains the case?

Similarly, the Chartered Institute of Taxation has raised concerns that the Bill does not set out how the new class 1A charge will be collected by HMRC, stating that it will instead be left to secondary legislation—more secondary legislation, the Government’s default position. The Treasury says it anticipates that the charges will arise and be paid in “real time,” rather than after the end of the tax year. However, tax experts note that this is a break from normal practice and will prove extremely cumbersome, requiring additional resources at a time when the Government are continuing their disastrous reorganisation of HMRC.

Photo of James Cartlidge James Cartlidge Conservative, South Suffolk

It is always a great pleasure and highlight to hear the hon. Gentleman talking about distributional analysis, but does he agree that, where we have what are effectively exceptional one-off payments that are hard to predict, it can be difficult to undertake such analysis? Sometimes we just have to be honest and accept that a measure is relatively minor. Although the money it raises is significant, we are unlikely to have the sort of data he is asking for.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

It might be a minor measure, but the actual impact on individuals is potentially significant. I am interested in the impact it might have on individuals who lose their job, and not necessarily the capacity or otherwise of the Government to make an assessment of that. I focus my attention on those who may not get another job for a considerable period.

I now turn briefly to the second measure in the Bill, which seeks to introduce a similar NICs charge on non-contractual sporting testimonials for employed sportspersons. I look forward to leading the Government’s testimonial sooner rather than later.

Sporting testimonials have become a key part of our nation’s rich sporting history, presenting an opportunity for fans to pay tribute to sportspersons who are coming to the end of their playing career. I come from Liverpool, a city with a fantastic football team, Everton, and another football team, Tranmere Rovers. There is another team whose name I cannot remember; it has slipped my mind.

Under the Government’s proposal, the new class 1A employer NICs charge will apply after the first £100,000 and will make the controller of the sporting testimonial, usually an independent committee, liable to account for the charge where the employer is not organising the testimonial.

Although the Opposition recognise the logic of applying employer NICs to non-contractual sporting testimonials, where the money is going not directly to a sportsperson but, rather, to a testimonial committee, we are concerned that the majority of income from such testimonials comes from fans who make voluntary payments. If this measure is passed, there will be a clear inconsistency in the NICs treatment of voluntary donations or tips at sporting testimonials compared with the treatment of cash tips in the service sector, where the employer is not involved. That is something we will seek to address in Committee.

This condensed national insurance Bill is further evidence of the Government’s perpetual desire to shift the tax burden from the well-off to workers. Rather than tackling tax avoidance and raising taxes to ensure that the wealthy and large corporations pay their fair share, the Government are yet again introducing measures designed to raise additional revenue for the Exchequer from the termination payments of workers.

The introduction of a new employer NICs charge will inevitably lead to employers reducing non-statutory termination pay, leaving workers worse off when they have just faced the trauma of losing their job. To put it simply, this measure is unfair, cynical and disproportionate considering the scarring effect it will have on workers compared with the limited amount of revenue it will raise. We cannot support this, but we will look at it in more detail in Committee.

Photo of James Cartlidge James Cartlidge Conservative, South Suffolk 2:49 pm, 30th April 2019

Before I start discussing the Bill, Mr Deputy Speaker, I hope you will not mind my saying that it is a pleasure to follow Peter Dowd, as always, but it is a particular pleasure to follow the brilliant speech made by my hon. Friend Alex Chalk about climate change and his Bill about the net zero UK carbon account. It was one of the finest speeches I have heard since entering this place. It was an inspiring speech on an incredibly important subject. Having said that, although I intervened on the hon. Gentleman to say that this was a minor matter, that does not mean it is unimportant. I meant that it was minor in terms of the revenue, albeit that its revenue is important and welcome. We should add that it has been baked into the Government’s accounts, so if anyone were to oppose it, they would have to suggest where £200 million a year of revenue was going to come from, as we would be spending this money on public services, from which we will all benefit.

Given the context of politics today, I would understand it if someone sitting in the Public Gallery or watching this debate elsewhere were to look at the title of this debate, “National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill”, and think to themselves, “With all that is going on in the country—with these Union Jack and European Union flags outside, and all the talk about European elections, local elections, Nigel Farage back out on the stump and so on—is this really what we should be debating?” I would say that this Bill is important because, in its own way, it is the future of taxation in this country. Members may think that that is an odd thing to say, but we are going to be seeing a lot more of this type of Bill on taxation: measures that deal with specifics. I would not necessarily say that it deals with avoidance, but it is certainly a tidying-up measure that brings in welcome revenue.

Contrary to what the hon. Gentleman said, the Bill has little noticeable impact. Why do I say that? Ever since the early 1990s—since the 1992 general election and the 1997 one—and for the time being perhaps, the days when one of the main parties would go into a general election promising to change one of the main rates of taxation have gone. When I was elected in 2015, the Government we served in had specific legislation saying that we would not increase the main rate of national insurance. I think it also said we would not raise the main rates of income tax and VAT. There was legislation about the aid budget. We then found out that we would not increase tax on the self-employed and we would not increase the main tax on the employed. In fact, we changed inheritance tax. You soon run out of anywhere left where you can change any substantive tax, which must have been a concern in the Treasury; you are left with those yet to come and the good, old-fashioned national credit card. Our party has tried to avoid using that as much as possible. If Labour were successful at the next election, I am not sure it would be quite so successful on that—I think the card would take something of a hit.

The reason we support these types of measures is not because we welcome tax increases per se. In the context where the Government have pledged not to increase main rates of tax—I am sure Labour would be the same, although perhaps not on corporation tax—and in a political climate of no parliamentary majority, it is difficult to pass those “more radical” tax changes. So we will see more and more of these types of changes. We may call them tidying-up exercises or tax simplification measures—we have had many similar measures called “anti-avoidance”—but the point is that in total they bring in a lot of revenue. We are talking about significant revenue—£200 million a year is significant. If we put that in the context of the police budget, we see that it is a significant sum, so it is important. I will certainly be supporting this measure. I do not know whether the Labour party will, because I was confused by the hon. Gentleman’s speech. Perhaps we will get some clarity later.

One thing we should be wary of is that the specific area of taxation we are changing and increasing here is employers’ national insurance. I declare an interest, as an employer. I am a controlling director of a small business and have been for many years. It is fair to say that there are pluses and minuses with using employers’ NI as a method of obtaining revenue for Her Majesty’s Treasury. On the upside—this is why I have sympathy with this measure—it is saying, “Here are a lot of similar activities and it just so happens that in some of them employers’ NI is not paid. It is in the other ones, so we are harmonising the situation.” That is perfectly fair and reasonable. We have seen this in other contexts, with the classic one being IR35; people, often knowingly and perhaps sometimes unknowingly—it is hard to say—have constructed their tax affairs in such a way that, in effect, they are not having to pay either some employees’ taxes or the costs that there would be for a traditional company paying employees of paying employers’ NI. It is important always to consider the application of employers’ NI because, if it is not applied fairly, it can offer a perverse incentive in the tax system and create strange behaviours.

My right hon. Friend the Chancellor has talked about people who became self-employed and were not genuinely self-employed—I cannot recall the precise phrase he used, but we all know what that means. It means that someone is setting up their tax affairs in such a way as to reduce the amount of taxation they pay, rather than doing so because they are a plumber who, by their very nature, is going to be self-employed.

I was a mortgage broker before I came to this place. My business expanded beyond that, I am pleased to say, but when I started out it was always interesting to receive applications from people who were using personal service companies. This was a real problem, and understandably so. They had the benefit of not paying the tax, but the downside was that it was hard to get a mortgage because they were not technically a permanent employee. The banks and building societies used to take the view that they should therefore have to show three years’ accounts, which was often difficult for a first-time buyer. I encountered this issue many years ago and it is a perennial one. It is an important issue we need to continue to look at, so it is important that we have this measure before us today, examining the application of employers’ NI.

When I served on the Select Committee on Work and Pensions, when I was first elected, we held an interesting evidence session on gig employees—self-employed people or workers, whichever way one describes them, in the gig economy. These are people whose position is ambiguous. The Matthew Taylor report identified these people: they work for one employer and have all the characteristics of an employee, but are technically, because of their tax situation, self-employed. They thus have less security than other workers and cost their employer less. Interestingly, when we held the evidence session, I asked four of the largest such companies, including Hermes and, as I recall it, Amazon, whether they would consider paying into a form of auto-enrolment for the self-employed, were Her Majesty’s Revenue and Customs able to set up auto-enrolment so that it could be applied for by the self-employed, particularly those who work for a single company, and they all said yes. I hope we will see progress on that. The point is that there has to be the fair application of employers’ NI, in order to avoid abuse of the system and, ultimately, those in employment, of whatever form, having less security, less entitlement to benefits and so on.

The point about sporting testimonials is timely. Cricket was mentioned, and I am sure you will be aware, as I am sure you will be there, Mr Deputy Speaker, that at 7 pm the England and Wales Cricket Board will be out in force on the Terrace to celebrate and mark the build-up to this year’s cricket world cup. I am sure you have had many invitations already. Others have declared an interest in that they are cricket supporters. I do not know whether that is an interest, but I am a supporter of Middlesex. I very much enjoy going to watch them and have done for many years, having been born in Edgware, in Middlesex. Those who spoken about this are absolutely right; testimonials are part of the fabric of cricket, football and so on. The key point to make, which has been mentioned but must be stressed, is that testimonials can be used to raise not just money for the Exchequer but considerable sums for charity. I believe Wayne Rooney’s testimonial raised £1.2 million, of which £1 million was donated to charity. In 2006, Alan Shearer raised £1.6 million in his testimonial, with most of it going to charity, as I understand it. Although there is a tax issue involved, we should recognise that these higher grossing testimonials, often involving fantastic sports stars and shown on television, are raising a lot for charity.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

These testimonials are very important. A former Liverpool football player, Jamie Carragher, a Bootle lad, also had a testimonial and he put the best part of £1 million into his Jamie Carragher 23 Foundation. That is worth a mention.

Photo of James Cartlidge James Cartlidge Conservative, South Suffolk

I am grateful to the hon. Gentleman for mentioning the other Liverpool team, as it were. They seem to be doing quite well this season. It is a good and important point to make, because it sounds to me as though a relatively small number of sportspeople will have to pay a bit more tax in the coming years as a result of the Bill—there is a small number who do not have testimonials agreed contractually—but it is fair to have fairness.

Let me conclude on fairness. The hon. Member for Bootle and I have had one or two exchanges on Treasury matters over the years. He finished with quite a stirring wind-up, saying that with this Bill we were somehow supporting the rich—that classic old storyline that we were the party of failing to crack down on tax avoidance by the rich and were instead hitting the poorest. Well, what is the threshold in the Bill? It is £100,000.

Photo of James Cartlidge James Cartlidge Conservative, South Suffolk

The hon. Gentleman can correct me if I am wrong, but I believe the limit for testimonials is £100,000. [Interruption.] The hon. Gentleman mentions redundancy payments from a sedentary position; he can correct me if I am wrong again, but I do not think the Bill affects redundancy payments. It is about other, voluntary termination payments. On the subject of terminations, Mr Deputy Speaker, you will be delighted to hear that I shall now terminate my speech, but I will support this very good Bill.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader 3:00 pm, 30th April 2019

Let me start by saying that I agree with almost everything that the Labour shadow Minister said. I will not make any cricket puns because I do not know anything about cricket—I will just stay out of that one—but I will make a point of mentioning that Aberdeen is obviously the greatest football team and should be mentioned first in any discussion of sporting prowess.

First, on the issues raised by the Labour shadow Minister about the Bill process, I share his concerns about the fact that we were told we would be getting the Bill before it had been introduced to this place. That is a real concern. Perhaps the Treasury drew the short straw again, and when the Government announced that they would have a Second Reading of a Bill but panicked because they could not work out which Second Reading it should be, they scrambled around and said to the Treasury, “You guys must have something”, and the poor Treasury Ministers were dragged here to present this Bill.

The serious point is that this is a highly technical Bill and we have had a very short time to look through it. I looked through the explanatory notes, as I am wont to do in these circumstances, but they do not talk about the amount of consultation that was done or the number of people who contributed to that consultation. I am aware that perhaps there are tax information and impact notes that do talk about the amount of consultation that was done, but it would have been useful to have that information in the explanatory notes so that we could be clear about how many individuals and organisations had come to the Treasury and said, “These are the good things and the bad things about the Bill.” That would have put us in a much more informed position, although I am sure we will get into the meat of that discussion in Committee.

On the intention behind the Bill, it was announced some time ago that there would be changes in this policy area and it has taken a while for the Bill to come through. Why has it come through now? If it has been intended for some time, why has it taken so long for the Bill to come before the House? Was it just that the Treasury drew the short straw, as I said, and had to bring a Bill to the House today and just had to find something? It would be useful to know something about the timing for the Bill, why it has come along now and what the logic behind that is.

I have a couple of questions on some of the specific things mentioned in the Bill. In introducing it, the Minister said that if there is a contractual obligation that there will be a testimonial, that will be treated differently, but also talked about cases in which there is an expectation that there will be a testimonial, which to me does not mean the same thing as a contractual obligation. I am not clear what the Treasury means by an expectation of a testimonial. Somebody could score a goal in every single club game they have ever played, but that does not mean they have a contractual testimonial obligation. I would expect, though, that that person would probably get a testimonial for being such a big part of their football club. Is that what is meant by “expectation”? If not, will the Treasury confirm exactly what is meant by that word in the Bill?

On the amounts for testimonials, the explanatory notes say:

“The new Class 1A liability does not affect individuals as it is to be paid by the controller of the sporting testimonial.”

That seems a bit disingenuous to me, because although it does not affect the individual’s liability, it does affect the amount of money they will get. Has the Treasury done any maths on how much less sporting individuals will get from their testimonials because this liability might have to be taken off before the money is handed over to them? It seems to me that, rather than being something quite removed, it will have a direct impact on individuals.

The Chartered Institute of Taxation got in touch with me with queries about some things in the Bill. On the £100,000 limit, the institute said:

“The intention is that the NICs rules will replicate this and only impose Class 1A NICs on the amount chargeable to income tax. We have reviewed the NICs Bill and it charges to Class 1A the amount that is ‘general earnings’. We assume this means the amount above £100,000…but it is not clear. The termination payments legislation refers specifically to the amount chargeable under the Income Tax (Earnings &
Pensions) Act 2003. It is surprising that the same approach has not been adopted here.”

Why has the Treasury taken a different approach to the drafting of this legislation to that taken to the drafting of the termination payments legislation that was passed previously?

Photo of Jim Cunningham Jim Cunningham Labour, Coventry South

There is another question, about the definition of who is an employee and who is an employer. There have been various examples in the courts of people being treated as employers when they were actually employees. There is still a bit of obscurity about that when it comes to tax, which creates a lot of difficulty for people.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

I absolutely agree with the hon. Gentleman’s point. When in a moment I talk about the termination awards for individuals, I will discuss that specific issue.

On termination awards for employees, the explanatory notes say:

“The new Class 1A liability does not affect individuals as it is paid by the employer.”

The reality is that, again, it does affect individuals, because they will receive less money. If the employer is going to give out a pot of £40,000, they will be giving some of that to the Exchequer, instead of to the individual as they currently would. The details show that the Exchequer expects to receive £210 million for 2023-24 as a result of the change; do Ministers expect individuals to receive £210 million less and that that money will go to the Exchequer instead, or do they expect employers magically to find some more money and to continue to pay employees who are leaving their organisation the same amount as before, while paying a slice to the Treasury as well? It would be useful to know how much less the Treasury expects individuals to receive as a result of the change, not just how much the Treasury expects to receive.

The NICs change is the only example of a class 1A charge on cash earnings that the Chartered Institute of Taxation could find. Why has the Treasury decided to take the route it has chosen? Class 1A contributions are normally paid in respect of things such as benefits in kind, rather than on cash earnings. The Bill seems to me to make a fairly fundamental change to how NICs are treated and to the different classes of NICs. It would be useful to know why the Treasury has decided to make this change. Is it part of some sort of long-term plan to use class 1A charges on cash in other circumstances? Or will they continue to be used mainly on benefits in kind?

It seems to me that it is a bit of an ad hoc change. Perhaps the Treasury is putting forward some grand plan, or perhaps it is just a small change. I have asked similar questions about the recent changes to the Financial Conduct Authority and the Bank of England. It seems that a lot of small ad hoc changes have been coming through with no blueprint for where the Treasury expects to be at the end of the process and what it expects the system to look like at that point. It would be useful to know more about that.

I would like to know about a few main things. On the £100,000 for sporting testimonials, is the Bill intended to operate in the way things operated under the previous legislation on sporting testimonials, but the language in the Bill is just unintentionally a bit woollier? On employees, we have that issue with the class 1A charge; does the Treasury intend to make further changes to class 1A contributions, or is this the last change it expects to make? We expect secondary legislation to come through as a result of the Bill, to tighten things up and make further changes in future, but when is that expected to come—in this Session, or quite close to the Bill’s implementation in 2020? If it is the latter and the secondary legislation does not come through in enough time, it might be difficult for employers to make sensible decisions.

Photo of Craig Mackinlay Craig Mackinlay Conservative, South Thanet 3:10 pm, 30th April 2019

It is always a pleasure to follow Kirsty Blackman. The two of us often seem to be in the Chamber at a similar time discussing tax issues.

These measures have been a long time in process. Back in the Budget of 2016, there was talk of a consultation on trying to align more closely national insurance with tax treatment. I note that, today, the Exchequer Secretary to the Treasury said that this is a form of simplification of the tax system. I might disabuse him of those thoughts by telling him to look more closely at the new rules regarding post-employment notice pay within payments in lieu of notice as part of termination payments. Far from being simple, it is actually rather complex.

As I said at the very start, these proposals have been making their way through this House in various forms. There were some delays because of the unexpected election in 2017, but they did find their way into a draft Bill in December 2016—the National Insurance Contributions Bill. Some proposed changes came through in the 2017 Budget, which included the scrapping of class 2 national insurance for the self-employed—currently £3 a week—and a corresponding increase in class 4 national insurance contributions for the self-employed. They were highlighted as fairly controversial at the time, but I did not share that view. I was quite supportive of the increase in class 4 national insurance because of the generosity, as I saw it, of the new state pension that came into play. That slight increase in the class 4 national insurance rate was, I felt, a fair quid pro quo for the quite substantial increase in the new state pension, but, for whatever reason, that measure was not taken through. I had some serious concerns about scrapping class 2 national insurance, and I will explain why.

The lowly paid self-employed person may not hit the threshold for class 4 national insurance contributions, which is, I believe, something above £8,500, but are more likely to have paid class 2 national insurance contributions and so would be ticking up a national insurance record into the future. Given that WASPI women have concerns about where they find themselves today, I was worried that this House and future Members of this House—I will probably be long, long gone—would face a raft of new people saying, “Where’s my pension. I have been self-employed all these years.” They would then be told, “Ah, but you didn’t pay any national insurance; you didn’t pay class 2, and you certainly weren’t earning class 4.” I was pleased to see that that idea disappeared and that we are back to what was the old system.

We have had this £30,000 threshold for tax-free redundancy payments—let me put it in easy terms—for quite some time. It could be argued that we have been at that level of £30,000 for too long. I did a bit of research before today and found that the last time that the £30,000 threshold was raised was with effect from 6 April 1988. It must have been considered to be the right rate at the time—it was an increase in rate from £25,000 to £30,000. I did not manage to find out when the £25,000 rate was first implemented, but it must have been deemed at the time to have been the right rate for what was a tax-free settlement, or payment, for years of service within a company. It was obviously deemed to be the right amount for people to adjust to a new work situation, or to act as a bridge towards retirement for people who were getting towards the end of their normal working life, which was perhaps more traditional in those days of the ’80s. I know Peter Dowd raised some of those points in his speech.

Having consulted the Office for National Statistics for inflation increases since 6 April 1988, I found that £100 then is now worth £266 today. Applying that inflationary increase from 1988—no more, no less—that £30,000 would inflate to £79,800, or in broad terms £80,000. However, I do understand—for the record I am a member of the Chartered Institute of Taxation and a chartered accountant—that there is probably a perception that the £30,000 settlement payment has been a target to hit rather than a proper target for any other reasons. Hence we now have this fairly complicated formula for payments in lieu of notice. Changes came in on 6 April 2018, including this whole concept of post-employment notice pay. It was really to recognise the difference between contractual payments in lieu of notice and non-contractual payments in lieu of notice. I will not bore the House for too long with the formula that applies, but it is a fairly beefy one: it is basic pay multiplied by the number of days from the last day of employment, divided by the number of days in the last pay period, minus the amounts paid on termination—a formula given the letter T. Therefore, far from it being a tax simplification measure, the PILON rules have added quite a layer of complication to a figure of £30,000 that, in due course, should have been given adjustment for inflation in any effect.

We are now left with PILONs—new PILONs assessment of what they are actually worth—holiday pay, and any restrictive covenants being included within that £30,000 limit that is tax free and national insurance free. Above that, we have the normal rules of tax and—in complex speak—employers’ class 1A national insurance coming into play. What we are likely to see in terms of adjustment, in answer to the hon. Member for Aberdeen North, is an increase in employer contributions to pension schemes as part of a settlement on the way out, which is not any bad thing. There is nothing wrong with that.

We have a very powerful and strong message to tell about auto-enrolment. It must be the right thing for all employees now. We are now running into millions, and there will be a fund approaching tens, if not hundreds, of billions in due course, and that must be to the good, as people accumulate their own pension funds. We will look back at auto-enrolment and see it as one of the most successful and vital measures that any Government could have implemented. It is like any other measure. It sounds expensive—it means a percentage off salaries, which will always be unwelcome particularly in times of low inflation, and it means that people might see their take home salary go down—but there will be a lot of thanks from many employees in due course that these funds have been accumulated. If, in trying to circumvent, in an entirely legitimate way, paying the class 1A national insurance on these amounts—for normal employees over £30,000—employers provide more funding to a pension scheme, then that is something as a quid pro quo that the Treasury should actually support.

These measures should have come into play in April 2019. They were deferred last year for a further year, which is mentioned on page 42 of the official Red Book. Therefore, far from saying that these things have come out of the blue and have not been considered, they have been consulted upon since 2016. They nearly got somewhere, but were deferred for another year. Therefore, in terms of planning and getting that together, there is plenty of time for employers to make any due adjustment. I have really concentrated on part 1 of the Bill.

Let me turn to the sporting side of things and the £100,000 limit. There have been a lot of discussions on this subject, because we are talking about huge figures, especially when the very well-known sports stars have their testimonials. When there are millions of pounds involved, these people—who are already very wealthy—often decide to give all the money to charity, which is a laudable ambition. I suppose that the one downside of this type of legislation is that it is possible for the employer in such cases to suffer the national insurance on an amount that the recipient has never actually received because he or she has decided to put it through their tax return as a very generous donation to charity.

This subject brings out the debate about certain limits in our tax regime that have not been touched for a very long time. What was the purpose of the £30,000 threshold? There was a reason for it in 1988, but does it still apply in the modern employment market? Perhaps people do not work as long for the same employer now; that feature is probably slightly different today from how it might have been in 1988. What should the figure be? Does it deserve flexing up? We could have a similar debate across other bits of the tax code—perhaps including inheritance tax.

Lots of parts of the tax code have fallen behind inflation. They were originally there for a reason. Some were introduced when the Labour party were in government, but now that we are in government perhaps there is a debate to be had about what these things were for in the first place, as part of the tax simplification process. But if there is any fear or threat that there has been manipulation of the tax and NI system, it is right that these payments should be part of the normal weft and weave of what we are doing with national insurance. I therefore have no difficulty supporting the Bill, and I wish the Exchequer Secretary to the Treasury every success in its progress to the House.

Photo of Anneliese Dodds Anneliese Dodds Shadow Minister (Treasury) 3:21 pm, 30th April 2019

It is a pleasure to follow Craig Mackinlay, who always talks about these issues from a professional perspective, related to his work before he first entered this place. It was very interesting to hear his comments, and I will return to some of them as I set out the Opposition’s summary of our concerns about the Bill.

When the Minister was introducing these measures, he said that they were expected. As many Members have said, they most certainly were expected. In fact, they were introduced a lot later than we had anticipated, as Kirsty Blackman pointed out. In fact, the Government’s paperwork associated with the measures indicated that some revenue has been loss as a result of that late presentation. James Cartlidge noted that the figures here were “baked in” to the Government’s accounts. Well, if he looks at the accompanying paperwork to these measures, he will see that it actually appears that those expectations have had to change given the late presentation of the Bill to the House. Of course, Labour would take very different decisions on taxation. We believe that the rates for the very best-off should be increased for the top 5%, that a different approach should be taken to corporation tax and, in particular, that we should not be focusing on trying to increase tax on those people who have, above all, lost their jobs—of course, that is part of the focus of this legislation.

I will, however, start by discussing the sporting testimonials element of the Bill. These measures would see NICs treatment of sporting testimonials charged to class 1A NICs, mirroring the tax liability. As has been mentioned, this would only apply to testimonial payments exceeding £100,000. Many members have already noted that the situation—I hesitate to say “playing field” because we have definitely had enough puns in this debate—has changed since these testimonials were introduced, when many players were not earning enough money adequately to save for their retirement. Particularly in football, which is the sport that I know best in this regard, players at the very top levels are earning more than enough throughout their lifetime not to have to rely on these testimonial payments for future revenue. It is therefore appropriate that clubs as employers, or the testimonial committees that would be providing the payments, look to make these national insurance contributions.

The public are rightly angry about the amount of tax avoidance that the wealthiest in this country engage in, but I am concerned that these measures do not come close to addressing systemic issues within football, particularly around taxation. As I understand it, as of January, HMRC was looking into the financial affairs of 173 players, 40 clubs and 38 agents. Now, I have little doubt that the Minister is itching to mention the case of Rangers football club when he responds to the debate—I am well aware of the case that was taken against Rangers—but I think we need to contrast what has occurred in our country with developments in Spain, for example, where firm action has been taken against the extremely well-paid players who sought to artificially avoid tax. We have not seen similar action taken here. For example, the problem around image rights companies was known about for quite a long time before action was firmly taken. It is an insult to the thousands of volunteers at clubs across the UK—who scrimp and save to ensure that the players are paid, the grounds and stands are properly maintained, and records are properly kept—to see some of those at the very top get away with sharp practices.

Ministers must be aware that testimonials are actually becoming less common as a means of ensuring financial security for players and that the funds from testimonials are very often donated to charity, as many hon. Members have mentioned. I would like some more detail from the Minister about the perceived impact of this legislation on funds being donated to charity. Yes, in some cases funds may pass straight to a charity, but in other situations they go to charity eventually—via a player. In fact, if one looks at the charities that have benefited from the most recent testimonials, many have been foundations associated with particular players. The Minister said that, of the previous 220 testimonials that have been examined in relation to coverage by such measures, most would not have been covered because the testimonial was contractual or because its value was less than £100,000, but he did not talk about testimonials where charitable donations were concerned. I am a little bit worried that this quite important source of funds for charities might not be getting the consideration it requires as part of the Bill. I hope that the Minister will reflect on that in his closing remarks or provide more detail in Committee.

I turn to the impact of the Bill on termination awards. The Bill would introduce a new 13.8% class 1A employer NICs charge to any part of a termination award that is already income tax liable. The Minister has stated his contention that abuse exists in this field, with the claim that some employers might be disguising final payments as termination payments. Again, we really need to see concrete evidence. We have probed on this issue in previous discussions of Finance Bills, but we have not been provided with evidence of abuse. Actually, from memory, consultations carried out in this area did not suggest that there was widespread evidence of abuse. Surely, we need that evidence before considering these measures in detail.

In fact, as my hon. Friend Peter Dowd explained very clearly, this measure on employers’ national insurance contributions on termination awards is likely to lead to employers being much less generous with non-statutory termination awards and to leave people worse off at a time when many of them are most vulnerable. That could have severe implications for the individuals concerned, but it could also have wider economic implications. I was interested to learn that around 30% of all small businesses founded in the UK in recent times have been started in response to redundancy, with many people only having the resources to pursue their entrepreneurial ambitions because of their termination award. It is necessary to think about those wider impacts.

The Government maintain—indeed, we heard it again this afternoon—that this measure does not affect individuals, as it is paid by the employer, but that surely is not the case. In fact, the Government themselves predict in the material presented alongside the Bill that the measure would reduce wages overall by 0.1% over the year 2020-21. It is crucial that the Government undertake more detailed consideration of the likely impact of this measure.

As has been discussed, this is not the first time that this Government have sought to narrow the scope of tax relief on redundancy and termination payments. In the 2017 Finance Bill, they removed any exemption for payments in lieu of notice from the tax-free scope of payments for injuries. As Members will remember, that was very concerning with regard to workers’ rights, which are one of the main aspects of compensation in discrimination cases. The Opposition rightly contested that change.

Again in the 2017 Finance Bill, the Treasury provided itself with the power to vary the tax-free amount for other termination payments. Trade unions raised their concerns about that measure, as they believed that if the Treasury further lowered the tax-free threshold, it would incentivise employers to lower non-statutory termination awards even further. Indeed, the TUC has suggested that the tax-free element should be increased rather than decreased. I was interested by the comments made by the hon. Member for South Thanet, who noted that the value of the £30,000 threshold has been eroded significantly over time and would be worth more than double the amount if it had kept pace with current prices.

The Opposition remain concerned that the Bill still includes the power to potentially vary the NICs threshold upwards or downwards without proper scrutiny in this place, and I hope the Minister will be able to rule that out today. I also hope he will return to this in legislative form, to make it crystal clear that the Government do not intend to reduce the threshold.

I note that the guidance published alongside the legislation emphasises that

“no statutory redundancy pay on its own will be affected”.

That implies that non-statutory redundancy pay could find itself affected, exactly as the Opposition have warned. Can we have a clear statement that we will not see, via secondary legislation, tax and NICs being applied to voluntary redundancy payments for individuals with two years, or more or less than two years, of continuous service?

The Minister will be aware that this kind of application of class 1A NICs to cash earnings is highly unusual, to put it mildly. That point has been underlined by the Chartered Institute of Taxation and was made eloquently by the hon. Member for Aberdeen North. This appears to be a set of rather ad hoc changes. The hon. Member for South Suffolk, in a wide-ranging and interesting speech, suggested that the Bill is part of a general push to simplify the tax landscape, particularly when it comes to the relationship between payment as an employee and other forms of payment. In reality, we have seen an increasing complication of that landscape. We have not seen an alignment between the tax treatment of individuals and their employment treatment. Instead, we see an increasing bricolage of measures to try to deal with the disjuncture, with what is happening around IR35 being a good example. One would hope that the Government will start to try to get a grip of this issue in a more determined and less ad hoc fashion in months to come—if, indeed, they have months to come.

There is one last administrative issue that I want to mention. We have had referred to us by experts in this area the fact that HMRC has suggested that the charge will arise and be paid in real time, rather than at the end of the tax year, as is the case with other class 1A charges. That seems to require a new process—again, additional complication—for submitting information through the pay-as-you-earn real-time information submission and for HMRC to have to adopt a different process for allocating the different elements of that payment. There are already many issues with it allocating real-time information payments into the wrong pots. This seems to suggest additional complication, and we need the Government to rethink this and consider an annual payment, rather than a real-time one. This change potentially comes at the same time as other significant forms of upheaval within the tax system, from making tax digital to preparations for Brexit.

As my hon. Friend the Member for Bootle stated very clearly at the end of his remarks, we will not oppose the Bill at this stage, but we hope that it will be possible to make some substantial changes in Committee, because they are very much needed, as has been reflected by the tenor of this debate.

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General 3:34 pm, 30th April 2019

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

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

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

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

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

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

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy), SNP Deputy Leader

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

Photo of Mel Stride Mel Stride Financial Secretary to the Treasury and Paymaster General

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

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

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

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

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

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

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

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

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

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

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

Question put and agreed to.

Bill accordingly read a Second time.