Clause 31 - Failure by employers to make correct payments

Tax Credits Bill – in a Public Bill Committee at 6:45 pm on 22 January 2002.

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Photo of James Clappison James Clappison Shadow Spokesperson (Treasury) 6:45, 22 January 2002

I beg to move amendment No. 21, in page 21, line 17, after 'fails', insert 'without reasonable excuse'

Photo of Mr Nigel Beard Mr Nigel Beard Labour, Bexleyheath and Crayford

With this it will be convenient to take the following amendments: No. 38, in page 21, line 22, leave out subsection (2).

No. 39, in page 21, line 22, after 'employer', insert 'without reasonable excuse'.

Photo of James Clappison James Clappison Shadow Spokesperson (Treasury)

The clause provides that a penalty of up to £3,000 can be imposed on an employer who fails to make correct payments. Is there not a case for at least giving employers a let-out from liability under the clause when they have a reasonable excuse for the omissions? The opportunity to put forward a reasonable excuse is available under the preceding clause in the case of, for example, an applicant who fails to supply the correct information. However, the same opportunity is not given to an employer. In fairness, is there not a case for doing so? It would certainly be welcomed, especially by small and medium-sized enterprises. We have debated under previous clauses the burdens that the provisions would impose on such businesses.

Clause 31(2) seems to be a stiffening-up of the equivalent provision under the Tax Credits Act 1999, which would appear to be section 9(7). It provides that an employer is liable for a penalty if he

''fraudulently or negligently makes or receives incorrect payments''.

The requirement for the employer's failure to be established as fraudulent or negligent is removed and the employer faces what the Minister will recognise as a regime of strict liability, which is a stiffening-up as far as employers are concerned. Why is that stiffening-up being proposed at a time when concern is being widely expressed about the increasing burdens on employers?

Photo of Mr Paul Boateng Mr Paul Boateng Financial Secretary, HM Treasury, The Financial Secretary to the Treasury

Uncharacteristically unfairly, I portrayed the hon. Gentleman in an earlier debate as living a life of perpetual unease. In this regard, however, his lack of ease is entirely justified. He has put his finger on an error on our part. It is only right that I should own up to that—it's a fair cop, guv, you caught me bang to rights. The hon. Gentleman will be gratified to hear that he has put his finger on an omission. It was not our intention that penalties should be imposed on the basis of strict liability. We shall table an amendment in due course to make that absolutely clear. It would be wrong to penalise an employer for a course of action when the mistake was entirely innocent.

I must disappoint the hon. Gentleman on his first point, however. Our view is that there can be no reasonable excuse for refusing or repeatedly failing to pay tax credits to an eligible employee. We are not persuaded of the strength of the hon. Gentleman's amendment and I hope that, on reflection, he will feel able to withdraw it.

Photo of James Clappison James Clappison Shadow Spokesperson (Treasury)

What can I say? I am grateful to the Minister for that response. If I did feel unease in

relation to amendment No. 38, it has been removed. On the basis of the Minister's generous remarks, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 31 ordered to stand part of the Bill.