National Insurance Contributions and Statutory Payments Bill

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Norman Lamb: Am I right in my understanding that the power of prosecution has not been used in recent years, or at least has been used rarely?

Dawn Primarolo: I understand that the hon. Gentleman is correct. This is an example of having powers that are not used and probably another indication that they are inappropriate to the task that needs to be set. Opposition Members might be sceptical, but the Government encourage our

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Departments to address powers that are not used or are inappropriate to the task, or, as the Bill demonstrates, are there for good reason but act as a block on behaviour that we would like to encourage—therefore, they need to be amended. If the system was working perfectly well, one might ask why we were changing it, but as the hon. Member for North Norfolk said, criminal proceedings have not been used recently.

The whole thrust of the work that tax departments do should be to assist and encourage voluntary compliance by employees or employers, while having powers for use only in extreme cases. Maintaining a tax system with high levels of compliance, which we have, means ensuring that those powers are appropriate and appropriately used. We could have thousands of prosecutions, but that might clog up the system and take us no further forward. The idea is to educate employers so that they understand what their obligations are and have clear expectations of what the tax authorities will do, so as to produce the end result that we want.

The hon. Gentleman's final point was about the national minimum wage. The penalties are wholly consistent with those for failure to provide information with respect to tax and are identical to those for statutory paternity and adoption pay. However, compliance in respect of national minimum wage cases is different. The distinction, which hon. Gentleman may think arbitrary, concerns the Inland Revenue. The Secretary of State for Trade and Industry has responsibility for the operation of the national minimum wage, whereas Inland Revenue officers act as the enforcement arm. They do so on behalf of the Department and operate under powers that it introduced in section 31 of the National Minimum Wage Act 1998, which sets out criminal offences for failure in respect of the national minimum wage. The national minimum wage continues to bed in and the Inland Revenue has been successful in using those powers to ensure compliance, so I see no argument at present to move from that. However, there is a difference and the hon. Gentleman is right to flag it up.

Norman Lamb: I understand that the Paymaster General makes a distinction because the matter is dealt with by a different Department, but for employers that makes no difference. On the national minimum wage, they deal with one department—the Inland Revenue—that acts on behalf of the Department of Trade and Industry. Given that we are trying to move towards a consistent approach, surely it should make no difference whether two different bodies are involved. There should be joined-up thinking, or does the Paymaster General argue that criminal penalties are needed with regard to the national minimum wage but not with regard to tax? I do not understand the logic behind taking an approach to the national minimum wage different from that applied to all the other regimes of the Inland Revenue.

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Dawn Primarolo: That goes back to the point that the hon. Gentleman made when he asked when the criminal powers were last used over statutory sick pay or statutory maternity pay. If he asks me that question about the national minimum wage, he is going to get a rather longer list of examples in which criminal powers have had to be used, reluctantly, for enforcement. I do not know whether that is a product of new arrangements—I could not say whether there were more criminal proceedings when statutory sick pay was first introduced than there are now—but he makes a fair point about looking at the issue. However, for all that, the offence is prosecutable and one can be taken to court for failing to comply. It is important to understand the difference between complying with obligations and wilfully not complying.

On statutory sick and maternity pay, given the smallness of the number of those who remain intransigent and refuse to comply, it is the Department's judgment that those people can be brought into line by the use of penalties in civil proceedings.

Norman Lamb: May I ask the Paymaster General the question that she invited me to ask? Can she provide us with the statistics for prosecutions and convictions in relation to the national minimum wage? Also, she has referred to fraud. I assume that, irrespective of the fact that we are moving towards civil penalties, if there were evidence of a deliberate attempt to avoid a payment that is due, the criminal law on fraud could still be used in relation to tax, statutory maternity pay or statutory sick pay.

Dawn Primarolo: It is important to draw a distinction between failure to comply and wilful failure to comply, which can turn on small points, and fraud or evasion. We need to be able to respond. Given the breadth of the obligations on both the tax authorities and the taxpayer to which the tax authorities need to respond, it is important that, where we can, we have one set of rules and we pursue them. Sometimes, for there to be fairness, a response has to be proportionate, so there might be slight variations.

None the less, the hon. Member for North Norfolk makes a valid point. It is not for the Committee to discuss the national minimum wage, but there was, and still is, some resistance to those requirements. I cannot speculate as to whether new provisions go through phases, but I will say that the national minimum wage is a matter for the Secretary of State for Trade and Industry. I am happy to write to all members of the Committee about the position regarding prosecutions and their success rate, although that will be published in the joint minimum wage reports of the Inland Revenue and the DTI. There will be no problem with that. I have covered all the questions and I am grateful to hon. Members for their patience.

Question put and agreed to.

Clause 9 ordered to stand part of the Bill.

<<39>>Clause 10

Compliance regime for statutory sick pay and statutory maternity pay: Northern Ireland

Question proposed, That the clause stand part of the Bill.

Dawn Primarolo: The clause replicates clause 9 by dealing with the relevant social security legislation applying to Northern Ireland. Our previous discussion was the same as the one we would have for Northern Ireland, so I do not intend to detain the Committee by rehearsing it.

Question put and agreed to.

Clause 10 ordered to stand part of the Bill.

Clause 11

Minor and consequential amendments

Question proposed, That the clause stand part of the Bill.

Mr. Prisk: As clause 11 gives effect to schedule 1, may I have guidance from you, Mr. Griffiths, on whether we are considering that schedule at this time?

The Chairman: According to the selection list, it is to be considered after clause 15. It can be discussed then.

Question put and agreed to.

Clause 11 ordered to stand part of the Bill.

Clause 12 ordered to stand part of the Bill.

Clause 13

Commencement

Question proposed, That the clause stand part of the Bill.

Mr. Prisk: In previous debates, the Paymaster General suggested that there would be a year before implementation, but I am not sure when that year will begin. I assume that it will begin on commencement. If that is the case, subject to the passage of the Bill, when does she anticipate commencement? I am asking not for dates, but for an indication of when there will be commencement—when in summer or autumn, for instance—so that we can set out for people when the measures will come into effect.

Dawn Primarolo: It is intended that the measures in clauses 1 to 6 will commence by order when two months have elapsed following Royal Assent and that the measures in clauses 7 to 10 will commence, depending on Royal Assent, at the tax year starting in April 2005. That will allow time for the internal and external guidance to be issued, the new provision to be made available and any further clarification to be concluded.

Mr. Prisk: Therefore, is the Paymaster General referring to the year from April 2004 to April 2005?

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Dawn Primarolo: That is correct. Obviously, however, things depend on Royal Assent, and I am assuming that that will occur close to the tax year. If I am incorrect about that something else will have to be arranged, but it would be ideal to keep this relevant to the tax years and to go for implementation during 2004-05 with the measure becoming operational in 2005.

Question put and agreed to.

Clause 13 ordered to stand part of the Bill.

Clauses 14 and 15 ordered to stand part of the Bill.

3 pm

Schedule 1

minor and consequential amendments

Question proposed, That this schedule be the First schedule to the Bill.

Mr. Prisk: Schedule 1 is the most difficult part of the Bill to consider. Sadly, I have not found something missing, unattached and hoping to find a home. However, I have looked through the Social Security Contributions and Benefits Act 1992—some might argue that I ought to get out more often. However, rather than try to scrutinise the elements of the schedule, which amends five or six different pieces of legislation, I simply ask the Paymaster General to confirm that, first, there are no adverse changes that will materially affect employers or employees that the Committee has not been made aware of. Secondly, will she also confirm that the proposals contain nothing that she believes will significantly change the revenue collected by the Government once the Bill is enacted?

Dawn Primarolo: I am more than happy to give my confirmation to the hon. Gentleman on both those points. The schedule amends other legislation. I assure the Committee that it contains the minor, technical and consequential amendments necessary to ensure that the measures in the Bill are reflected elsewhere in the statute book. It does no more than that. He will appreciate from a brief look at the schedule that it must cross-reference with a complex web of legislation.

Question put and agreed to.

Schedule 1 agreed to.

Schedule 2 agreed to.

 

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Prepared 13 January 2004