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Earl Russell: My Lords, I thank the Minister for a sympathetic, thoughtful and careful reply. I understand the point she makes regarding conditions which are not continuous and care which is not continuous. Those are two separate possible discontinuities. I understand that those may create considerable difficulties. However, I am not yet convinced that those difficulties are entirely insuperable.

The Minister is aware that the present route also contains considerable difficulties. Usually, when one gets into this situation, one needs a little bit of lateral thinking. Usually there is some other way one can come at the problem. But I have been in social security long enough to know that coming into it and thinking that one can simplify it is not nearly as easy as it looks.

I hope that the Minister will be prepared to think about this matter again, because there is a real problem to consider. We will not solve it tonight. I thank the Minister for the care and thought she gave the matter and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hollis of Heigham moved Amendment No. 63:

After Clause 76, insert the following new clause--

Expenditure for facilitating transfer of functions etc

(".--(1) The Secretary of State and the Commissioners of Inland Revenue may incur expenditure in doing anything which in his or their opinion is appropriate for the purpose of facilitating either of the following things, namely--
(a) the transfer to the Commissioners of such of the functions of the Secretary of State as are exercisable by the Contributions Agency; and
(b) the exercise by the Commissioners of those functions.
(2) The powers conferred by subsection (1) above--
(a) shall be exercisable whether or not Parliament has given any approval on which either of the things there mentioned depends; and
(b) shall be without prejudice to any power conferred otherwise than by virtue of that subsection.

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(3) Any expenditure incurred under this section shall be defrayed out of money provided by Parliament.
(4) In its application to Northern Ireland, this section shall have effect with the following modifications, namely--
(a) for the first reference to the Secretary of State there shall be substituted a reference to the Department of Health and Social Services for Northern Ireland;
(b) for the reference to such of the functions of the Secretary of State as are exercisable by the Contributions Agency there shall be substituted a reference to such of the functions of that Department as correspond to those functions; and
(c) for the reference to money provided by Parliament there shall be substituted a reference to money appropriated by Measure of the Northern Ireland Assembly.").

The noble Baroness said: My Lords, we switch back to the delights of national insurance. I had hoped your Lordships would agree this amendment formally at this late hour. However, in moving Amendment No. 63, I shall speak also to Amendment No. 113.

At the Committee stage of this Bill my noble fried Lord Haskel explained that the Government would be bringing forward amendments to give effect to the reforms of national insurance announced in the Budget. We have already debated the amendments that we introduced to give effect to the structural changes to national insurance.

My noble friend also explained that, for one of these reforms, the transfer of the Contributions Agency to the Inland Revenue from April 1999, the Government might need additional powers. Those would allow us to incur necessary preparatory expenditure in advance of the completion of the substantive legislation which would effect the transfer. That is the purpose of Amendments Nos. 63 and 113.

The transfer of the Contributions Agency--we covered some of this ground earlier today--to the Inland Revenue represents a major streamlining of the system which will benefit employers and contributors alike. We want to effect the transfer as quickly and smoothly as possible.

The Inland Revenue already carries out much of the collection of national insurance contributions--around 94 per cent.--and has powers covering areas of contributions work. What will be needed is a Bill to transfer those powers not already within its remit. We are currently considering the issues and plan to bring forward legislation in due course. However, we do not anticipate that it will be possible to finalise the details in time for the new Bill to be brought in this Session.

It is essential to make sure that we provide continuity of service to contributors and employers in moving to the new structure. There is much to be done to achieve this: we must change computer systems; redesign forms and leaflets; and ensure that we keep employers informed. Prudent management suggests that we should start making operational preparations in good time so that there is no risk of disruption of service in April 1999.

Amendment No. 63 and the consequential amendment linked to it--Amendment No. 113--would ensure that there is no doubt about the propriety of spending what needs to be spent at the right time to bring about the necessary improvements to the system. They lay an essential foundation for a smooth and speedy shift of

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responsibilities. I hope your Lordships will agree with me that in the circumstances our approach is sensible and pragmatic, and feel able to support this necessary measure. I beg to move.

Lord Higgins: My Lords, in one sense this is largely a mechanical matter, but it would seem clear that the transfer of responsibilities from the Secretary of State to the commissioners of the Inland Revenue does much to reinforce the contention I made earlier; namely, that the contributions are now in virtually every sense a tax.

This clause largely involves the approval for spending money and making the transfer. I am not clear as to what effect that has on the efficiency of the operation. Presumably the intention is that there should be some savings as a result of the consolidation of the collection of social security contributions and tax, which also sometimes goes towards paying that amount since the National Insurance Fund itself is topped up on a substantial scale from general taxation.

Unless my memory fails me, we have not had justification for this specific transfer. Perhaps the noble Baroness will quickly give us a reason why we are doing this at all, if it is not a tax.

Lord Goodhart: My Lords, I welcome this step in the continuing evolution of national insurance contributions into taxes. I felt that they had crossed the boundary line already, but they are certainly moving forward. This step is one which will enable several consequential reforms to take place, such as the one that we debated what now seems a long time ago, on the first day of Committee, in relation to the transfer of questions on contributions from the social security appeal tribunals to the special commissioners of income tax. This is therefore something, for my part, that I am happy to support.

Baroness Hollis of Heigham: My Lords, the noble Lord, Lord Higgins, asked more generally why we are doing this, as well as querying the savings we envisage.

The reason for bringing the Contributions Agency and the Inland Revenue together in a single organisation is that we believe that it will promote greater alignment of tax and national insurance contributions, which is one of the Government's long-term aims.

Lord Higgins: My Lords, did the noble Baroness say integration?

Baroness Hollis of Heigham: My Lords, I said "alignment". On such matters, which are beyond the reach of my usual role, I am careful to stick to my brief and the word is "alignment". It will therefore reduce the burden on businesses and people so that they can sort out taxes and contributions through one organisation. It will help the two departments to share experience, knowledge and skills in combating avoidance. It will make better use of resources and

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help in fairness in taxation. It will enable the departments to combine their efforts and customer service. It will give business and other representative bodies one focus for discussion of improved legislation, procedures and guidance and make it easier over time gradually to align the tax and national insurance rules.

Obviously all that will be labour intensive. Savings are estimated at around 200 members of staff in the first two years and longer-term efficiencies are expected. I hope that the comments made by the noble Lord, Lord Goodhart, were to welcome the measure and hope that it may be built back into some of the decision-making appeals procedure. That point may or may not come up at Third Reading, but it certainly arose earlier.

Lord Higgins: My Lords, perhaps the noble Baroness will allow me to intervene to say that I was surprised by the figure she gave. Having represented a large chunk of the Inland Revenue for 33 years, the savings of 200 that she mentioned seem very small.

Baroness Hollis of Heigham: My Lords, it relates to the numbers of staff.

Lord Higgins: My Lords, in the light of this integration, that seems to me to be an extraordinarily small number.

Baroness Hollis of Heigham: My Lords, I take refuge at this time of night in the phrase "longer term efficiencies are expected". I am sure the noble Lord will hold us to account to that effect. As he will understand, most of the work continues. The efficiency savings come from the integration of the overlap of work, but most of the work continues. However, I do not doubt that we shall return to the matter in due course. As the noble Lord will know, this was suggested by the Taylor Committee and has had broad support. It seems a sensible way forward. I hope the House will accept that.

On Question, amendment agreed to.

8 p.m.

Clause 77 [Regulations and orders]:

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