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Amendment proposed (this day): 4, in clause 12, page 11, line 2, at end insert—
‘(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.’.—(Cathy Jamieson.)
I rise to speak in support of my hon. Friend the Member for Kilmarnock and Loudoun.
I must say that, when I first looked at clause 12, I had to pinch myself, because I thought I was dreaming. I thought, “Here is an example of compassionate Conservatism.” Then I realised that “compassionate Conservatism” is, of course, an oxymoron, and the clause is not quite what I thought it was. The important question to bear in mind when looking at the clause is: what is the rationale behind it? Why have the Government made the proposition? I will be interested to hear the Minister’s explanation.
I fear that the clause, as my hon. Friend has already pointed out, is yet another example of this Government’s antipathy towards the national health service and of an attempt—albeit a relatively small one—to promote private health care. I would be interested to get the Minister’s assurance that that is not the case, and to know what his explanation is for the clause.
The question I pose to the Minister is this: what is wrong with the NHS? Why is the clause necessary? If we had a properly functioning and funded NHS that was genuinely supported by the Government, there probably would not be a need for some ruse to benefit the private health care system yet again. We have already seen, with the Health and Social Care Act 2012 passed by this Government, how donors to the Conservative party have benefited from multi-million-pound health service contracts since its passage. It remains to be seen what the consequence will be of this particular little clause we are debating this afternoon.
It is important for us to understand who will benefit from the Government’s proposition. My hon. Friend the shadow Minister posed a number of questions that need an answer from the Minister and my hon. Friend the Member for Inverclyde asked how small employers will be able to take advantage of the policy and whether they will be bypassed, as we often see with many other measures proposed by the Government in different areas.
I, too, want to ask a question, regarding the £500 benefit that the Government are proposing. Is £500 an adequate sum? I am not necessarily arguing that it should be higher; as I have already said, if we had a functioning and well-funded NHS, there would be no need for the proposal to encourage the private health care sector. But what happens to people with complex needs? Will £500 be adequate to assist individuals with such needs? As my hon. Friend the shadow Minister said, could it lead to people being forced back into employment when they are not fit to work? Let me make this point again: the NHS is there for a purpose. We all know that the Conservative party voted against it when the NHS was introduced all those years ago—
That is true, but the philosophy that was espoused by the Conservative party at the time still obtains within the party today, contrary to the protestations we often hear from Conservative Members about how much they support the NHS. The reality—we see this from the measures that they introduce and from the way they vote—is that they speak with forked tongue.
This is a very sensible amendment because it is right and proper that Parliament and the wider general public know and understand. It will be there for all to see who is going to benefit from the proposed changes and what their impact will be. What is the point of introducing a measure if it is unlikely to have any significant impact, or if it is really there simply to benefit the private health care sector? We and the public deserve and have a right to know. We have seen previously that the Government like to introduce legislation in a policy vacuum, without any proper pre-legislative scrutiny, based on ideology rather than on common sense and what is in the best interests of the British people.
It remains to hear what the Minister says and whether he agrees with the proposal; he probably will not, though I think he should. It is a sensible amendment that asks for the impact of the changes and who the beneficiaries will be. Why would any Government Member object to that? What could the rationale be for objecting to identifying the beneficiaries and the impact? Maybe he can enlighten us, but I doubt he will be able to do that. That is why the amendment is before us.
I hope that the Minister can find it in his heart to recognise the common sense outlined by my hon. Friend the Member for Kilmarnock and Loudoun and support the amendment. It would show that there could be some cross-party agreement on this modest and sensible proposition. My hon. Friend made the point that she was not indulging in ideology. She said that some her hon. Friends might wish that she were, and I am probably one of those. She was trying to be helpful, and I hope the Minister will see that in the spirit in which it was intended, and not base his response on what I have said. He should listen to the common sense of my hon. Friend and support the amendment.
It is a pleasure to serve under your chairmanship, Mr Caton. I have some experience of being offered private medical treatment by my previous employer. Naturally, being an avid supporter of the NHS, I declined. I am sure Government Members will identify with that.
That is why I will pick up some points made today. As my hon. Friend the Member for Derby North said, this is about the implications of encouraging participation in private medical treatment, regardless of a pretty low cap of £500 per annum. Just look at what that would buy you in rehabilitation treatment. I worked for a large employer who offered this and I found it became less and less relevant, because it needed to put in a rounded approach to reducing the sickness absence. That came with preventive measures as well; it was not only offering the treatment but pre-empting it by putting in preventive measures such as advice on nutrition, life changes such as reduction of alcohol, elimination of smoking and the benefits of regular exercise.
That package was put in place at the front end of the offer of medical treatment and the hope was to eliminate the need for that treatment. That is a large commitment for a small employer to put in place. I do not believe that we will see an uptake from small employers. That is why we have sensibly put forward amendments to gauge uptake and where in the country it might arise. What about severe and complex medical problems? Will this provision be offered to those types of employees? The one thing that the private sector does not like is risk and people with complex medical problems are a risk here. We would probably see them exempted. We need to see that this medical treatment is being offered across the board and not just to some employees who are considered low risk.
We have heard about the £500 cap. What does that buy in today’s market? I do not say that trying to get someone rehabilitated back into the workplace is not welcome, but realistically it would probably pay for two or three visits to a physiotherapist. The problems that are increasingly seen in the workplace are predominantly back problems, and complex back problems. My area has seen a boom in private physiotherapy outlets. They are inundated with people coming to them with back problems from the workplace because we are now working in new environments where previously we had not spent such a length of time.
A point that has not been picked up on is that many people now work from home and are encouraged to do so by their employer. They may develop common or running problems and so need to visit a physiotherapist on numerous occasions. Those problems will probably continue for many years. Those people may never be cured and may never be seen wholly back in the workplace without repercussions.
What we are asking for is wholly sensible. It would be entirely sensible to adopt these amendments to gauge the beneficiaries, to ensure that the provision is being applied across the board and to look at the distribution analysis of the beneficiaries up and down the country. That would look at the take-up and the commitment of SMEs to this level of support for their employees and, indeed, at the exemption levels probably being too low for those with complex or long-term illness. I hope that the Minister can accept the amendment.
It is a great pleasure, Mr Caton, to welcome you back to the chair this afternoon and to respond to the debate on clause 12 which introduces a tax treatment for employers who fund recommended medical treatment for employees on sickness absence.
Allow me to explain these changes before turning to the Opposition amendment. Every year, 130 million working days are lost due to sickness absence and around a million people have a period of sickness absence lasting four to six weeks. Sickness absence leads to annual costs of £9 billion to employers, £4 billion of losses in individuals’ earnings and £2 billion of costs to the taxpayer through health care, sick pay and taxes forgone. Indeed, 300,000 employees move from sickness absence on to benefits every year.
I am sure that hon. Members will be familiar with the November 2011 review into sickness absence by Dame Carol Black and David Frost. It recommended the creation of a new occupational health service that would conduct a health assessment when an individual had been absent from work on ill-health grounds for four weeks. It would then provide advice on how they could return to work. The Government accepted this recommendation and the new service, the Health and Work Service, is expected to commence in late 2014.
The 2011 report also recommended that expenditure by employers to help employees to return to work should attract tax relief. In response to this recommendation, the Government agreed to introduce a targeted tax exemption for employer expenditure up to an annual limit. The changes made by clause 12 will exempt from a charge to income tax expenditure by employers to help employees at risk of long-term sickness absence return to work. Without the exemption, such expenditure would be subject to income tax and national insurance contributions.
Evidence suggests there is an increased likelihood of employees moving on to benefits after an absence lasting four weeks or longer. The exemption will therefore be targeted at individuals who are expected to reach or who have already reached four weeks of sickness absence. The exemption will apply to expenditure by an employer on recommended medical treatment up to an annual cap of £500 per employee. Medical treatment must be recommended by either the Health and Work Service or by an occupational health service arranged or provided by an employer. The exemption will come into effect when the new health and work service is launched, which is expected to be in late 2014.
There may be confusion about cause and effect. The Minister stated that those who are off sick for four weeks are more likely to move on to benefits, but those four weeks of absence might signify that they have a grave illness. It is not necessarily the case that if everybody is back at work within four weeks, the problem will be resolved.
The hon. Lady makes a reasonable point. It may not be the case in every circumstance, but I hope she shares the Government’s objective in clause 12. If we can provide assistance, by using the tax system or through other means, to enable people to get back to work relatively quickly, that is an objective we should seek to meet. It is clearly in the interests of society, the taxpayer and the individuals concerned if we can provide support at an early stage.
The clause will support our objective to widen access to occupational health treatment and encourage employers to engage with the well-being of their employees. It will reduce the administrative burden for employers who pay for recommended medical treatment for their employees. If their expenditure per employee remains below the expenditure cap, employers will no longer have to report the relevant benefits to Her Majesty’s Revenue and Customs. We expect around 10,000 businesses a year to benefit from the changes. Our estimates also show that around 140,000 employees will benefit from interventions qualifying for the exemption every year.
On the points raised during the debate, I will first address the administrative burden and how it will apply to small employers. The exemption applies to all employers, regardless of how many people they employ. There will be no need for an employer or employee to make any claim to HMRC. Employers will not need to notify HMRC of any funding up to the £500 annual limit for an employee. The administrative burdens will be minimal. We have ensured that the exemption is easy to understand and administer, and there will be no need to make any particular claim.
The hon. Member for Kilmarnock and Loudoun asked how the measure will work. There is flexibility. For example, an employee could spend his or her own money on occupational health services to help them get back to work and be reimbursed by the employer with no tax consequences. Alternatively, the employer could arrange the treatment. Either approach would work.
The £500 cap is in line with the estimated annual cost of the medical treatment that would typically be recommended to help employees return to work. The Department for Work and Pensions has estimated that the average cost of the medical treatment that is likely to be recommended will be from £150 to £250 per employee. The cap at £500 will enable employers and employees to benefit fully from the exemption where the employer funds two courses of recommended medical treatment for an employee in a year. Consultation responses indicated that the cap is in line with the average cost of the typical treatments likely to be recommended. Those typical treatments include physiotherapy and counselling. We expect most recommended medical treatments to be for musculoskeletal or common mental health conditions. I hope that is helpful to the hon. Members for Inverclyde and for Kilmarnock and Loudoun.
I am struck, in relation to the matter of the £500, by the intervention from the hon. Member for Derby North. He appeared to make the simultaneous arguments that it should not happen at all and that £500 was not generous enough. I hope I have explained the £500 to him. To explain why we are doing this, I recognise that the hon. Member for Kilmarnock and Loudoun’s questions were more probing than ideological. The exemption in the Health and Work Service established by the Department for Work and Pensions is intended to be complementary to occupational health care that is already available. Ongoing clinical care will continue to be provided as now by the NHS or by private health care arrangements. Where we can encourage employers to take a close interest in the position of their employees and help them get back to work quickly, we believe that the most sensible and pragmatic response is to do so. This tax relief was recommended by Dame Carol Black and David Frost.
Amendment 4 varies from what we have seen before from the Opposition. By and large, they have presented new clauses calling for reviews. This is a radical departure in being an amendment calling for a review. It would require the Government to publish a report within six months of Royal Assent setting out the impact of the changes made by the clause and an analysis of who is expected to benefit. However, the exemption will not come into effect until late 2014 so any such report would be of limited value in understanding the impact of the clause. A tax information and impact note setting out the impacts on individuals, households and businesses has already been published. The Government keep all tax policies under review.
To conclude, the clause introduces a tax exemption for employers who fund medical treatment recommended for their employees. It will support employers’ efforts to help their employees return to work after a period of absence due to illness or injury. I therefore hope that the clause may stand part of the Bill and that the amendment will be withdrawn.
It is a pleasure to have you in the chair this afternoon, Mr Caton. We have had an interesting, relatively short but thorough debate, not least with the contribution from my hon. Friend the Member for Derby North, who I think may be going soft—not in his old age as he is not as old as the health service, as we discovered—because he at least recognised that the Minister had a heart. That is something that my hon. Friend the Member for Bassetlaw (John Mann) might not have conceded had he been here.
I should also mention the contribution of my hon. Friend the Member for Inverclyde, who spoke of his personal experience about the cost of treatment. I want to add a couple of points. I listened to the Minister carefully. It was almost getting to the point where I might have been persuaded and then something went awry in the middle. That was when he began to talk about the employee arranging and paying for treatment and having it reimbursed, or the employer arranging it for the employee. One of our concerns, particularly in relation to small businesses or people on low incomes, is that it is unrealistic to expect in all circumstances that individuals will be able to pay for treatment and get it reimbursed. What discussions, debates and arrangements are they going to have to make with their employers in doing that? There may be circumstances in which that is possible, but I would not like the expectation to be that the employees had to pay and then be reimbursed. I am sure the Minister will clarify that.
I am slightly surprised by the hon. Lady’s attitude. This is about giving employers and employees flexibility. It is a tax relief that is open. This is not a compulsory arrangement. But if an employee is, for example, having back problems and arranges some physiotherapy treatment, the employee can then go back to the employer and say, “This has cost me £150. Can you reimburse me?” The employer can reimburse. There is no tax charge. I am not sure that that is something that is beyond people. But this is not a compulsory arrangement. This is an option available to employers and to employees.
I hear what the Minister is saying, but perhaps he has not understood the reality of what it is like for many people in the working environment. It is not simply a case of being able to go off, arrange treatment and then go back to the employer and say, “Will you now pay for that? Thank you very much. You will get a tax break.” For many employees that would be quite a difficult negotiation. In those circumstances, people may go off and do that but then the employer, for some reason, may say, “I’m not going to reimburse that.” It also raises the question about continued treatment or treatments over a period and what was described as the “typical treatment” of up to £250 and the costs being between £150 and £250. That does not seem to fit with the experiences that people have had with the types of illnesses or conditions that lead them to be off work for more than four to six weeks. There have been concerns about that and my hon. Friends and I were trying to tease that out.
My understanding is that it is not a case of the employee telling the employer, “I need to go chiropractor. I am just going to nip off now. Would you mind paying for it as you will get a tax break?” Speaking as a former employer and former employee, what normally happens is that good employers have workplace schemes. The Government are sending a signal to say that this is a good thing to do and incentivising employers to have workplace schemes to look after their employees as respectable and caring employers. Does the hon. Lady think that is the case and does she not welcome that?
I am tempted to say that had the Minister explained things in those terms and perhaps answered some of my other questions in a slightly different way, I might have been prepared to accept that, but that is not what I heard from him. He seemed to suggest that it would be possible to do things in a slightly different way. I am happy for him to clarify that on the record.
To be clear, this has to be done through the employer. It is the employer who makes the arrangements. But it can be done by reimbursement of the employee or it can be paid directly by the employer. This is offering flexibility to employers and employees that does not currently exist. If an employer wants to provide this support at the moment, potentially there could be a NICs and income tax charge to the employee. We are providing a degree of support. I should have thought that all members of the Committee would welcome that.
I will in a moment. The Minister referred to counselling as part of the range of things that could be provided. Perhaps my hon. Friend is going to say something about that. I really would like to have seen a bit more information about how the figure of £250 was arrived at, in relation to what would be provided for a counselling service for someone with perhaps a series of difficulties.
I am even more concerned now than I was at the start, given the Minister’s intervention. It seems to indicate that he is entirely out of touch with reality, when he talks about employers reimbursing their employees. How does he expect—perhaps my hon. Friend can assist me on this—an employee on the minimum wage to find the resources to pay, say, £100 or £150 for some physiotherapy, and then go to their employer and ask for it to be reimbursed? Surely the money should be paid up front rather than expecting the employee to pay first and then get the money back. Many people on low incomes simply do not have spare resources to do that and get it back later.
My hon. Friend makes a valuable point in showing the reality of life for many people on low incomes. I hear what the Minister has said, in that it is not compulsory to do anything in a particular way, but none the less, we must ensure that there are no inadvertent consequences. That is why we have gone for this radical departure, as the Minister described it, and tabled amendment 4, calling for a report.
On the basis of what I heard in the Minister’s response and other comments, I am persuaded to press the amendment to a Division.