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Lord Haskel: My Lords, perhaps I may, first, acknowledge the long experience of the noble Lord, Lord Higgins, on the Treasury Select Committee. I am sure that the Government will take careful note of his warnings about legislation which is not properly considered. Indeed, a warning coming from someone with the noble Lord's experience certainly ought to be listened to.

I accept that this is not a usual way of dealing with matters but our course of action was determined by the Budget. I regret that we have had to bring forward provisions at this late stage of the Bill. However, it is sometimes necessary to do so and I have explained why it has happened on this occasion. The Government have made every effort to provide information and assistance to noble Lords to ensure that proper scrutiny takes place. Indeed, copies of the new clauses which change national insurance structure and other provisions have been made available to organisations representing business and those with a professional interest in national insurance matters. We wish to ensure that all the measures in the Bill are properly scrutinised, both within and outside Parliament, and that we get them right. We believe that the steps we have taken ensure that that will indeed be the case, despite the fact that the new measures have appeared rather late in the day.

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I turn now to the matter of Commons procedures for considering amendments made in this House. It is, of course, a matter for those in the other place to determine what procedures they follow when this Bill returns to them with our amendments. The Government are aware of the recommendations of the Commons Modernisation Committee, but I do not think that it is proper for me to comment on them at this time.

The noble Lord, Lord Higgins, asked why such provisions were not in the Finance Bill and suggested that I might probably have some sort of a quotation to give him in that respect. Indeed, I do. I can refer the noble Lord to Erskine May to back up my arguments. The latest edition states clearly on page 782:

    "To the extent that they are payable into the National Insurance Fund, contributions paid by earners, employers and others under the provisions of social security legislation are not regarded as charges upon the people or as subject to the rules of financial procedure".
Of course it is possible to include matters in the Finance Bill which are not strictly within its scope, but we believe that it would be wrong for benefit-related issues to be introduced in that context. It would mean that this House would not have the opportunity to discuss them.

As for the criticisms about the drafting of the Bill and the number of amendments that are needed, it is certainly true that we have had many amendments. The number is perhaps excessive for a Bill of this size. However, social security legislation is complex. It is important to ensure that we get it right as it affects everyone. Therefore, we have continued to check and double check, and, we hope, improve the legislation, even though that means that there are many technical amendments. This is an important part of the normal scrutiny procedure, which is the task of your Lordships' House.

I move on to the arguments regarding tax and national insurance contributions and whether people are entitled to benefit without paying anything. I must tell the House that that is simply not so. These amendments do not give people access to contributory benefits when they have not paid contributions. They simply reduce the amount people have to pay, with the greatest proportionate reduction being enjoyed by the lower paid. That is something which the noble Lord, Lord Goodhart, said that he welcomed. We are abolishing the 2 per cent. "entry fee" paid on the portion of earnings below the lower earnings limit so that all employees who pay national insurance pay less. Employees will pay contributions on earnings exceeding the lower earnings limit and will gain entitlement to benefit as a result of those contributions.

I turn now to the question put by the noble Lord, Lord Higgins, as to why these figures are not in the Red Book. The Chancellor of the Exchequer announced that he intends future reforms to raise the lower earnings limit for employees to the level of the single person's tax allowance. That remains the Government's intention; but the change is not being made in this Bill. The Government will be considering

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the nature of the link between contributions and benefit over the coming months. I suggest, therefore, that we await the outcome of those considerations. Of course, the figures will be in the Red Book at the appropriate time. That is why they are not in it now.

I turn to the quotation--

5 p.m.

Lord Higgins: My Lords, I am having difficulty understanding what the noble Lord is saying. He appears to say that the figures are not in the Red Book. But I thought the Chancellor made it absolutely clear that it was his intention that the Government would go ahead with the changes next year. The noble Baroness shakes her head. If that is not so, let us have it clearly on the record.

Lord Haskel: My Lords, as I said earlier, the Chancellor has said that it is his intention to introduce the measures, but he has not said when that will be. I turn to the quotation--

Lord Higgins: My Lords, I am grateful to the noble Lord for giving way. Will it be in this Parliament?

Lord Haskel: My Lords, we have to await the Chancellor's statement. It has been suggested that employees' national insurance charges are just a tax and that the Chancellor has said that is the case. I repeat they are a charge on employers but they are intended to pay for specific benefits. Unlike income tax, they form part of the national insurance scheme. There is a big distinction here. Surely the point is that national insurance charges are a burden on the employer, whereas taxes may be subject to all kinds of exemptions. One can have write-offs, for example. There are all kinds of ways of dealing with tax, but national insurance charges are a burden on employers.

Lord Goodhart: My Lords, I thank the noble Lord for giving way. However, with respect to the noble Lord, national insurance contributions are simply a hypothecated tax. They are hypothecated to payment of retirement benefits and other benefits.

Lord Haskel: My Lords, they give people entitlement to certain benefits. Whether they collect them or not depends on their circumstances. Therefore national insurance contributions are not a hypothecated tax. The noble Lord, Lord Higgins, said that people will not make contributions. The changes in this Bill do not take anyone out of the contributions scheme. As regards the detail not having to be on the statute book, for employers to prepare for the measure of course it needs to be on the statute book, as one of the main preparations one needs in order to instigate changes in national insurance these days is to reprogramme one's computers. One cannot reprogramme one's computers unless one has the relevant figures. That is why it is essential for the detail to be on the statute book.

The noble Lord, Lord Goodhart, said that contributory benefits are partly funded by tax anyway. It has been a long established practice that there may be a grant from general taxation to the National Insurance Fund. That is

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not new. The grant is relatively small in relation to the fund. It may be of interest to noble Lords to learn that this year no grant is expected. The noble Lord, Lord Goodhart, said that these measures will encourage employers to hire more part-time workers in place of full-time workers. He also mentioned the position of people in universities. These changes make 12.5 million employees, earning up to £440 a week, cheaper to employ. I am not talking about part-time workers. The noble Lord, Lord Goodhart, also suggested that the measures may encourage a low skill economy and may penalise high value firms. Certainly, higher costs fall on employers who pay more. They can afford a small rise in their costs. However, this will be a relatively small addition to the wage costs of the highly paid compared with the recent pay settlements in the private sector. I believe that my right honourable friend the Chancellor made that observation at the CBI only yesterday.

Lord Goodhart: My Lords, do the Government intend to compensate the universities for the £20 million that this will cost them over and above the grants which have already been announced?

Lord Haskel: My Lords, I am not in a position to respond to a question of that kind. I shall certainly write to the noble Lord about it.

The noble Lord, Lord Goodhart, asked about green taxes rather than employer national insurance charges. I know that this is a matter which is dear to the heart of the Liberal Democrat Party. The Government believe that the reduction in employer contributions at the lower end of the scale is best offset by increases in contributions for the higher paid. The Government believe this is an important part of the welfare to work programme. In this way we shall encourage employment which is a high priority for the Government at the moment.

I believe that I have responded to all the points that were raised. This debate has continued for some time. All noble Lords have agreed that they are in favour of the objectives and the purpose of this series of measures. We could discuss the detail for some time, but I feel it is time that the Question was put.

On Question, amendment agreed to.

Clause 52 [Class 1B contributions]:

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