Good morning, Mr Sheridan. What a pleasure it is to be in our third Committee Room during the short course of this Bill.
Amendment 11 proposes to address the issue of the efficacy and efficiency with which applications for a national insurance holiday should be processed. It is a simple and, I think, perfectly formed amendment, and given our discussions in the evidence session, it is also entirely unobjectionable. During those discussions, the assistant director of Her Majesty’s Revenue and Customs, Mr Mitha, was quizzed about not just the volume of applications that had so far been made, but the trajectory, given that 400,000 applications are eventually expected. It was clearly felt that HMRC potentially had the capability to process any applications and inquiries within a relatively short space of time. Nevertheless, I, in my humble experience, and many hon. and right hon. Members will know—from the processing of passports or Child Support Agency casework, on which we have had cause to make inquiries in the past—that, from time to time, the best intentions of Departments can sometimes fall short of the reality. Therefore, we feel that it is prudent to ensure that a gold standard of service can be achieved by HMRC in respect of this particular national insurance holiday.
The amendment suggests that HMRC should aim to process all applications within a three-month period. Mr Mitha said:
“I would be disappointed if we were not able to turn them around far more quickly than three months.”—–[Official Report, National Insurance Contributions Public Bill Committee, 2 December 2010; c. 28, Q99.]
Given that businesses themselves are quite wary of the bureaucracy involved in dealing with Government, the form-filling processes can make them feel as though they are being distracted from their core activities. The amendment gives the Minister an opportunity to rise to the challenge and fly the flag of efficiency on behalf of his Department, and accept the fact that businesses want speedy processing of applications.
Of course, it would be good practice to give a verbal undertaking. If the Minister wishes to set out the convention that he will guarantee that all applications are processed within a three-month period it would go some way towards addressing our concern. However, it would be far better to enshrine the matter firmly in legislation so that the standard is clear. Let us call it a citizen’s charter in the best traditions of the former Prime Minister, John Major. I not talking about a cones hotline but proposing that a commitment to the rights that businesses can expect should be contained within the Bill. It would be good practice and would set expectations. As students of management theory know, it would be a SMART initiative—specific, measurable, achievable, realistic and targeted.
I strongly support my hon. Friend’s amendment. Does he agree that if the proposal is not accepted, some of the attraction of the scheme to small employers might be lost? Indeed, delaying employing new people could mean that the scheme is nowhere near as effective as it might be.
Indeed. There are already worries that the target of 400,000 applications may be quite ambitious, especially given that we have had only 1,000 applications to date. If the current trajectory were to continue, it would mean only about 80,000 applications over the course of the scheme, which would be woefully short of the ambitions that Ministers have enunciated, so it is an important matter. There are no costs associated with the amendment, so I can see no reason to resist it, and it would give a clear target for all those involved in the administration of the scheme to focus on.
New clause 5, with which the amendment has been grouped, relates to the staffing dedicated to the task in hand and would ensure that those
“dedicated to the administration of Part 2 of” the Bill
“are additional employees and not taken from other tasks necessary for the continuation of the other functions of HMRC.”
During the evidence session, I recall hearing that HMRC’s national insurance complement has 3,000 or so staff, and 240 of them—I may be wrong on the figures, but it was roughly that proportion—would be set aside for undertaking the national insurance holiday. I calculated that that was some 6%. My maths is not that acute this morning, but to set aside 6% of the current national insurance team is quite a chunk of the work force. My anxiety is, therefore, that redeploying those individuals may have an adverse affect on other elements of national insurance processing activities for either employers or employees.
In the evidence session, officials were upbeat about that impact, as I would expect them to be; most senior managers tend, quite successfully, to gloss over the impact of redeploying staff. Those on the front line, however, know full well that one could not magic away that number of staff without having an effect on some other part of the national insurance system. I must, therefore, press the Minister to tell the Committee in more detail from which tasks those staff will be drawn. Will a particular unit of activity in the national insurance team be closed down, diminished or halved, or will the pool of 240 staff be accumulated by skimming a couple of dozen here or there from different tasks across the organisation?
The new clause sets out our anxieties about the adverse effect on the administration of other national insurance processing tasks and seeks, therefore, to ensure that the scheme will be administered by additional employees. That is an important task and could merit the assurance that there will be additional staff, so as not to diminish the work of the rest of HMRC.
More generally, we have already had a few doubts. I do not want to use the word “sophistry”, but I suspect that there is anxiety in the trade unions representing HMRC staff and others, who feel that although there have been reductions in the head count across HMRC in many different ways, announcements have proclaimed that extra investment or extra head count will be dedicated to particular tasks, without making it clear from where the resources will be found. For the sake of clarity, openness and honesty, it is important that the Minister tells us from what other tasks those staff will be drawn. If he can assure us that they will be additional staff, that would be satisfactory. That is the purpose of new clause 5.
It is a pleasure to serve under your chairmanship, Mr Sheridan.
With amendment 11, the hon. Member for Nottingham East appears to want to ensure that HMRC has a three-month target to guarantee the turnaround of an application. I assure him that amendment 11 is unnecessary, as HMRC is currently processing all applications within 48 hours and the vast majority of applications are submitted online, so the initial checks are automated. That means employers receive an immediate response confirming whether they are eligible for the scheme on the basis of the information provided. If the employer is eligible, they can start withholding employer national insurance in respect of eligible employees. HMRC has processed approximately 1,100 successful applications since the scheme started and has rejected a further 54, as we have already heard.
As the hon. Gentleman knows, it is not customary to place such aims in legislation—that is the wording that he used. Putting an aim in the legislation adds very little, and he does not say what the consequences of failing to meet it are. It is not usual to use legislation for such purposes.
The hon. Member for Luton North is right to say that substantial delays in processing would be a disadvantage to the scheme, unless there were very good reasons for it, such as doubt over the application. Only a couple of days ago, hon. and right hon. Members argued that we should delay implementing the scheme altogether until Royal Assent. I take the hon. Member for Nottingham East’s point, but the amendment does not add anything to the legislation.
New clause 5 seeks to ensure that staff administering the holiday will be additional employees. The hon. Member for Nottingham East is concerned that HMRC employees should not be taken away from their existing work to administer the holiday. The implication of the new clause is that a team of 240 people should be dedicated to that specific task, but the proposal is unnecessary. Concerns about administration are unfounded. HMRC is able to administer the holiday without adversely affecting other activities. The staff needed to administer it will be from a range of areas, such as compliance, customer contacts and operations, so HMRC will use existing staff with expertise in those areas.
HMRC has devised new processes for dealing with the holiday, and staff have been trained in them. Incorporating additional steps in day-to-day caseworking means that it has not been necessary to employ new staff. That is the best use of HMRC resources and provides flexibility to allocate more resource to the holiday as the need arises.
I am grateful to the Minister for the help he is providing to the Committee by giving at least a broad indication of where the 240 staff will come from; he mentioned compliance and customer contacts. Could he expand on what “compliance” means? Obviously, there are tasks to be done to ensure that businesses, employers and employees comply with the law on the collection of tax. If fewer staff are dedicated to that activity, will it have an impact on revenue, for example?
I do not intend to be diverted into a general debate on HMRC policy and spending review proposals, but I say to the hon. Gentleman that we intend to devote more resources to tackling evasion and criminal fraud, and dealing with avoidance. We will strengthen capability in those areas, which will involve expanding the number of staff and promoting greater use of technology. Over the four-year period, we believe that we will be able to strengthen substantially the compliance capability of HMRC, including any issues related to this particular holiday. For the reasons that I addressed in earlier debates, we do not see that as likely to be a problematic area, but we will monitor it.
I also have a point on staff numbers. In the past five years or so, we have seen the staff of HMRC reduced from 93,000 to 66,000. The argument made by Labour when it was in government was that there were opportunities to find efficiency savings within HMRC over that period.
I rise to support the amendment proposed by my hon. Friend the Member for Nottingham East. I am not convinced by the Minister’s suggestion that this will not have much of a resource implication for HMRC. I am plainly in the minority, but I am concerned about the cut in HMRC’s headcount given that we have such a vast tax gap and that a substantial number of billions of pounds have simply not been collected because of a lack of resources.
In recent weeks I have spoken to the representative of the senior officers of HMRC in the Palace—I have to declare an interest, although not a pecuniary interest, because I am a member of the Public and Commercial Services Union support group within the House. I believe that there must be a resource implication, and I do not think that is a bad thing. This is a good scheme and it should be resourced.
One suggestion that I have, which I made at the public evidence session, is that increasing the number of tax inspectors would be a tremendous benefit in bringing in more revenue. Tax inspectors collect many times their own salary. It depends on the tax: for VAT it is relatively low at only five times their salary, but for income tax, and particularly for corporation tax, we are talking many millions of pounds and a multiple of many times the salary of an individual tax officer. An increase in the number of tax officers would bring in more revenue, which would more than cover the additional resource cost of the scheme and which could be used in other areas of public spending.
The Minister has twice said that he is pleased that I am in favour of a tax-cutting scheme. I am one of those people who want to see employment generated, and, unusually, this is a scheme designed specifically to generate employment. So, in that sense, it is very good. Given £1 billion to spend, however, I would want to find a way to maximise the employment generation potential of that sum, and it might be that some other scheme would promote more employment. I want to see not either/or, but both. For the benefit of the economy and of us all, we need to generate much more employment—unemployment is now at 2.5 million.
If we bring down unemployment, all of our problems will begin to disappear, particularly the deficit problem about which the Government are so concerned. I am primarily concerned about unemployment, and this scheme is about reducing unemployment. My suggestion for increasing the number of tax officers would also reduce unemployment, both directly, because more tax officers are appointed, and indirectly, because it would make possible the generation of employment elsewhere in the economy.
I note the points made by the hon. Gentleman. In the spending settlement for HMRC, over the spending review period £900 million will be focused on specific areas in which HMRC believes it can significantly increase its yield. That will involve employing more tax inspectors in particular areas. I also note the hon. Gentleman’s argument that lowering the amount of employer’s national insurance contribution that needs to be paid is likely to create jobs. That, if I remember rightly, is a somewhat different position from the one his party took at the general election.
I am grateful to the Minister for taking the time to address some of the issues. I am not entirely in agreement with him that amendment 11 is unnecessary. I think it would be harmless to put it into the Bill, but we have aired the issue and we may return to this in a different form on another occasion.
My hon. Friend the Member for Luton North made some important points on new clause 5. It is necessary to start asking about the resources available in HMRC, not just for addressing the tax gap but in relation to the conditions and the activities to which staff are allocated. One question that needs to be asked, which perhaps can be answered on another occasion, is whether all those who are going to be redeployed and transferred will be on a different contract or will retain their present contractual arrangements, albeit in a different line of activity. I presume that it will be a redeployment scenario and they would not be laid off and rehired again on lesser terms. Those are important issues that we can raise on another occasion, as they matter to the people who will administer the scheme. I am glad we have had the opportunity to discuss this. I beg to ask leave to withdraw the amendment.
We now come to a series of questions on clauses 9 to 15. I may, with leave of the Committee, group the questions on clause stand part for consecutive clauses rather than putting the question separately for each clause. It would be helpful if Members could indicate whether there are any clauses that they would like to debate separately.
I wanted to make a couple of points on clauses 9 and 10. I am more than happy to make them simultaneously if that would help the Committee. I leave it to your good judgment, Mr Sheridan.