Clause 7

National Insurance Contributions Bill – in a Public Bill Committee at 6:30 pm on 7th December 2010.

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Question proposed, That the clause stand part of the Bill

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I have a few brief questions for the Minister. The clause specifies the appropriate amount. We have already debated the sum of £5,000, which is a round figure that was probably thought up in haste before the general election. Nevertheless, that is the amount that is in clause 7. There are a number of cases that could cause some head-scratching in the Treasury when it comes to defining the relevant earnings that may or may not come under the sum that is set out in subsection (4). For example, there is the issue about defining the principle place, as set out in subsection (3), where the employed of the new business undertake their employment activities. Not all employees are static; some are mobile, such as hauliers, taxi drivers and indeed seafarers, as the Minister will recall.

The humble mariner, under subsection (5), who may set off for a voyage from one part of the country to another, or from one part of the European Union to another, may cause some difficulty for the 240 members of HMRC staff sitting at the end of the hotline ready to pick up the telephone. When the seafarer’s employer rings up and says that their employee will embark from a port in Yorkshire such as Kingston upon Hull, and set sail for the east of England, maybe for a coastal area of a constituency of one of the members of the Committee—perhaps not in West Suffolk, but my geography is not what it was—

Photo of Matthew Hancock Matthew Hancock Conservative, West Suffolk

The hon. Gentleman has just made an eloquent case about how employment in some parts of the country and in some jobs is not specific to a location. Does that not completely hole below the water line, if he will excuse the pun, the Opposition’s argument that a regional system is invalid? It supports exactly the argument that the Minister was making all morning in response to requests for an overly complex and overly localised geographical system.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Quite the contrary. The Bill draws a line somewhere vaguely down the middle of the country, and bisects our great nation into two qualifying and non-qualifying areas, but I am not sure that those non-static issues of employment are such a simple matter. If the hon. Gentleman will bear with me on my voyage,  setting sail from a qualifying part of the country to a non-qualifying part, I am not clear from clause 7 how the appropriate amount would be apportioned in that employee’s activities.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

Might the definition of such an employee’s place of work be where the ship is registered? If it is a coastal ship that is registered in London and it departs from Kingston upon Hull with another ship that is registered in Hull, would the employees on one ship be granted the tax cut and the others not? Where are the definitions?

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Absolutely. The Minister may well seek to reference regulation 115 of the Social Security (Contributions) Regulations 2001 in his defence, but that is not a wholly substantive defence.

I am perturbed not only by those voyages by sea, but by other employment activities that may cross over the boundaries between different qualifying regions. Take the humble ice cream purveyor in his or her van, who drives around different parts of the country, perhaps including tourist destinations. How on earth would that new budding small enterprise be able to apportion the amount of time that they have spent in those places, in order to work out whether they qualify for the national insurance holiday? I accept that it might be quite difficult for more than two or three employees to fit in the van, but the Committee can imagine examples—better than those that I can produce off the top of my head—of circumstances that force these questions of the Minister. How are we defining the principal place? Who will arbitrate over what is or is not the principal place of employment? Is that a decision for the normal national insurance appeals arrangements, or is it left to executive officers in Her Majesty’s Revenue and Customs? How can the regional element apply, particularly to seafarers, mariners and others who are mobile?

Photo of David Gauke David Gauke The Exchequer Secretary

Let met see if I can address the hon. Gentleman’s concerns. I think that he will find that it is a little simpler than he fears. Essentially, the test is this: where is the principal place of business for that employer? So long as it is not within the excluded regions, all employees will benefit from the NICs holiday, in accordance with the various rules that we are discussing. They might travel around, but it is not necessary to apportion the amount of time spent in excluded regions and in other regions.

The hon. Gentleman alighted upon the example of mariners, and I know that he has an interest in that area, because we seem to find ourselves debating seafarers regularly—I am pleased that he has managed to leave Iceland out of the debate.

Photo of David Gauke David Gauke The Exchequer Secretary

Indeed.

The reference to mariners in clause 7 relates to apportionment according to time, rather than location, in the sense that a mariner may go out on a fishing expedition, for example, and some of that period might fall within the holiday period and some of it might not. In those circumstances, the payment the mariner would receive for the entire voyage would need to be apportioned. That is what that provision is about. There is no need to  make apportionments between time spent near the port of Hull and time spent near any ports in West Suffolk or Hertfordshire that the unlikely mariner might find himself docking in, which would not quite work. I hope that that provides the hon. Gentleman with a little reassurance.

There is a right of appeal against the decision on where the principal place of business is. Clearly, that point needs to be established by the employer and HMRC. It is one of the reasons why it is easier to do that with broad regional boundaries, rather than by constituency or local authority. The process will therefore be easier because it will generally be obvious where the principal place of business is. It will be, for example, the shop, office or depot from which the business is conducted or controlled, and there is HMRC guidance on that.

Photo of Stella Creasy Stella Creasy Labour, Walthamstow

One of my concerns with the regional variation is that people might put up name plates for offices in northern cities but practise is the south of the country, probably because of the nature of their business, whether it is consultancy or a type of industry that requires travelling. Has the Minister thought about how the 240 employees who at the moment are doing light-touch regulation might deal with those instances that would essentially constitute fraud under the proposed scheme?

Photo of David Gauke David Gauke The Exchequer Secretary

The hon. Lady is entirely right to highlight that as a concern that we need to address. It is a question of fact, and we had the debate earlier about the penalties available, within the national insurance contributions scheme. She is absolutely right that it would be fraud if someone provided false or misleading information that stated that their business was located somewhere it was not. It is a question of fact and something that needs to be policed, and it is absolutely right that we should do so. Subject to assessing where the principal place of business is, I hope that I can reassure the hon. Member for Nottingham East that there will be not be enormous complexity in working out where a mobile employee is, because it is the location of the employer that is the test. With those comments, I hope that clause 7 can stand part of the Bill.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 6:45 pm, 7th December 2010

I hear what the Minister says. The onus will clearly be on the Government and the Treasury to ensure that that is administered as successfully as possible. I simply wanted to probe a number of those points. I am grateful to the Minister for taking the time to set out his views on the matter.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

The Minister made much play with the word “complexity” when debating a previous clause. Complexity arises with clause 7 simply because of the arbitrary geographical divisions in relation to where the Bill, once enacted, will apply. He would do well to look again at those divisions and simplify the Bill, and in so doing he could overcome some of the complexity about which he is so concerned.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned.—(Mr Goodwill.)

Adjourned till Thursday 9 December at Nine o’clock.