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‘(6) The Chancellor of the Exchequer shall, within six months of Royal Assent, publish and lay before the House of Commons a report setting out the impact of changes made to the Income Tax (Earnings and Pensions) Act 2003 by this section. The report must in particular set out—
(a) the expected beneficiaries; and
(b) a distributional analysis of the beneficiaries.’.
It is a pleasure to move the amendment and speak to the clause. People probably feel strongly about recommended medical treatment issues and several organisations have commented on how the measure might affect them. In essence, the clause affects employers and employees where the employer pays for recommended medical treatment. It provides for a new exemption for employers from income tax where they meet the cost of recommended medical treatment provided to an employee to assist that employee to return to work after a period of absence due to ill health or injury. It is subject to an annual cap of £500.
The proposed measure means that the medical treatment must be recommended by either the new Health and Work Service or an occupational health service provided or arranged by an employer for the purposes of helping an employee return to work after the period of absence due to injury or ill health. At the moment, expenditure by employers on medical treatment for employees is generally chargeable to income tax, either as a payment of earnings or as a taxable benefit.
The background to the issue relates to the announcement of the £500 exemption for employers from income tax following the decision to abolish the statutory sick pay threshold scheme. I do not know whether hon. Members have been in the same position as I have. Businesses in my constituency have contacted me with concerns regarding the changes, fearing that the burden would fall on them. Perhaps we will discuss that in more detail as we go through the issues in the clause.
The percentage threshold scheme—PTS, as it was more frequently known—compensated employers for higher-than-average sickness absence. An employer was entitled to recover some of the statutory sick pay paid to their employees if the total SSP paid in a tax month was greater than a set percentage of gross class 1 national insurance contributions, and that was the employer’s and employee’s liability for that month. The Government’s rationale for abolishing the PTS was that an independent review of sickness absence had shown that it had not encouraged employers to manage sickness absence in the workplace.
Businesses have brought a few concerns to my attention. There is concern about the nature of some of the businesses that will be affected, and the scale. Some businesses told me that the changes will not assist them to manage the process of long-term sickness. Many of those businesses employ, in general terms, a relatively small percentage of people, but they are going to be affected. They resented the suggestion that they were not trying to do their best to get people back into the workplace.
Businesses also raised concerns about what the impact would be if they were trying to be loyal to their employees, many of whom had served them over a number of years. They were concerned that the proposal was not only unlikely to help them, but would make it more difficult for them to work with employees to get a return to work. It has been said that the money saved will be reinvested in a new health and work service, the aim of which is to provide an alternative form of support for employers. We are trying to enable employees with sickness absence to return to work more quickly by better managing that sickness absence. The concern about what seems to be proposed here—I am sure that the Minister will wish to respond to this—is that it might encourage the use of private medical treatment by using a tax break. Also, it does not give due account to the opportunities or the support that is needed in many instances for employees and employers to use NHS services. It will be available to certain employees only when an employer chooses to arrange the benefit. Who will take the decision on which employees will benefit from that?
My understanding from the consultation that took place over the summer and the issues raised then is that, originally, the exemption was going to apply only if it was recommended by the new Health and Work Service. My understanding now—again, the Minister will no doubt correct me if I have misinterpreted—is that that has been changed to allow treatment recommended by existing occupational health services. There was concern—I come back to the points made earlier—that decisions or policies, notwithstanding whether they have the best of intentions, do not always take account of the impact on smaller employers. I understand guidance will be made available for such scenarios, but concern was also raised about the levels of exemption, particularly around what might happen in relation to severe or complex illnesses.
My hon. Friend mentions the smaller employers who might find it difficult to implement a rounded approach to sickness absence management. They would find it difficult to put in place preventive measures, whereas larger employers would be able to give health and nutrition advice, and so on. Smaller employers cannot do that, and many private medical insurers would not be interested in taking on such small numbers.
My hon. Friend again makes a powerful point. We can talk about the whole question of health at work: the ability to intervene at an early stage, identify where there is a problem, assist people to deal with issues and support people with long-term conditions but who want to be in employment and need reasonable adjustments to enable them to work. All those things are important under the auspices of health at work. One concern that has emerged is whether the exemption is the best way to support both the employer and the employee, because it is not clear whether it provides much incentive for employers, given the minor level of treatments it appears to address, such as physiotherapy.
It seems to me that, as Ministers have said, the matter is about sitting down, supporting people, and saying, “What help and support do you need to make sure this sickness absence is not any longer than it needs to be?” Surely the hon. Lady welcomes the Government’s move in that regard?
I absolutely support the view that if there is a difficulty and someone has a medical condition that requires them to be off work, and it is deemed that they will be fit to return to work, of course employers should sit down with people and look at how best to facilitate that process, but there is concern about how that would work in practice. The policy objective states:
“The Government believes that more can be done to support employees to return to work. Together with the introduction of the Government’s new service, to be known as the Health and Work Service, this measure will support the Government’s aims to widen access to occupational health treatment and to encourage employers to engage with the well-being of their employees.”
To what extent is that about widening access to occupational health treatment? In what context? Is it about being able to access services only in the private sector? Are there opportunities to look within the NHS and for people to access the services available there?
It is not entirely clear who the beneficiaries of this particular measure will be. Can the Minister give us some examples of how the measure will work in practice? We know that there was a consultation, but what assessment has been made of the difficulties faced by employers when monitoring where several payments have been made in respect of an individual employee? As we know, depending on the medical conditions and treatment required, people may be off for a period of time. They may then come back and be off for a further period while continuing treatment. It is not entirely clear how that it is going to work in practice. In fact, it is not entirely clear how the new health at work system is going to operate and encourage the outcome that the hon. Gentleman will no doubt refer to again, of supporting people back into work and dealing with the problems.
My key concern is that employers should get people back into work. What used to happen is that people would end up on incapacity benefit where they were more likely to die than recover. That surely has to be condemned. Does the hon. Lady agree that that situation was wrong and that it is better to be proactive, which is what this policy aims to do?
I am going to choose my words carefully because I understand the spirit of the hon. Gentleman’s comments. Of course, there were many instances when people were moved on to incapacity benefit simply because they were not fit to return to work. There is a whole other area of discussion we could go down about those judgments on people who sometimes after many years of working life get to the point where, no matter the interventions, it will be difficult for them to return to their former jobs and professions full time. Of course we should find ways to support them.
I know from my constituents, as I am sure do other hon. Members, that there is sometimes frustration when people have been off work and are waiting for medical treatment such as access to physiotherapy, but waiting lists are such that they have to remain on lists for longer than they would like. They cannot always finance the opportunity to get treatment themselves and feel at a further disadvantage or they are not entirely sure that their employers are going to be supportive in getting them back to work, perhaps with adjustments to the workplace.
While I accept the hon. Gentleman’s comments as a general principle, the important point concerns the detail of how it works in practice. Once again, we see not only individual businesses raising concerns about it, but some of the professional associations. The Association of Taxation Technicians has argued that the qualifying conditions potentially once again discriminate against smaller employers. That is a running theme this morning and I am sure it will come up again.
The Government talk about wanting to support smaller employers, SMEs, start-ups and micro-businesses as well as larger companies. However, the reality is not following the rhetoric. Will the Minister come back with specific details on the steps the Government are taking to ensure that this measure does not bring an additional administrative burden for smaller employers?
I would also like to press the Minister. I am genuinely trying to understand the rationale for setting up the scheme in the way that it has been set up in relation to private medical treatment. I hope he appreciates that I am not making an ideological point. Some of my colleagues might wish that I was. I am actually making a point about the practicalities and how to implement and deal with this. Should not some of the resources be diverted to the NHS, perhaps to offer ways of reducing waiting lists for some of the treatments or to ensure that people could access those treatments, rather than simply being a tax relief for the employers?
I should also like clarity on the point about the company occupational health services now being able to recommend treatment. Are they likely to recommend private treatment rather than the Health and Work Service and NHS treatment? There are a number of issues here which we need to tease out in more detail. On what basis was the level of exemption set at £500? Would that be sufficient for longer-term specialist treatment, such as for stress or mental health issues? Is the measure part of a longer-term plan to remove statutory sick pay for the longer-term sick? What safeguards will be in place to prevent workers from being forced back into work prematurely if they are referred to the Health and Work Service?
We need to explore all those issues in more detail. We need to look at the questions that have been raised by employers and by the professional bodies and to try to ensure that, once again, we do not have unintended consequences either for small businesses or for the people we wish to assist. When the Minister replies on the level of exemption and the cap at £500, could he tell us what was done to look at the types of treatment that would be available within that cap? Did that include an analysis of the range of treatments that some individuals might require? It might not be only physiotherapy or only something else; a combination of things might be required. What have the Government done to assess that properly and to see whether that cap is the correct one in this context? Does he have any plans to review that?
I hesitate to offer a complete answer to that because I suspect that in some instances it is a bit like market forces. I know a number of people who have recently had to have physiotherapy and it was not particularly inexpensive. If people also have to go to chiropractors, for example, additional costs can be incurred. I am sure that the Minister will look at that in some detail when he responds. I also hope that he can tell us what he has done in relation to mental health issues and stress at work, which in many instances require different forms of treatment and different forms of support to ensure that people can return to work and make the contribution that they wish to make. I have probably given the Minister enough questions to consider.