Previous Section Back to Table of Contents Lords Hansard Home Page


Lord Skelmersdale: Perhaps I can put a slightly explanatory complexion on this matter. My noble

14 Jan 1999 : Column 297

friend's question is perfectly valid. In the event of a catastrophe in the Contributions Agency, given these transfer powers and functions which move from the authority of the Secretary of State to civil servants who will eventually be part of the Inland Revenue though for the moment within the Contributions Agency inside the Inland Revenue, who will be answerable to Parliament? Will it be the Secretary of State for Social Security, the Chancellor of the Exchequer, the Financial Secretary or the Paymaster General? Who will Parliament be able to question on that matter?

Baroness Hollis of Heigham: My understanding is that, should there be such a disaster--heaven forbid!--and questions are raised in the House on the day-to-day running of the Contributions Agency as an operation, it would ultimately be the responsibility of the Paymaster General and, if it raised high level issues, the Chancellor. As and when policy for NICs is handed over, it would be the responsibility of the Paymaster General through to the Chancellor. That is on the collections side. The disbursement of those revenues in terms of social security spend will remain the responsibility of the Secretary of State for Social Security.

Lord Skelmersdale: Does that mean that if the millennium bug interferes with the computer--this Bill will be an Act of Parliament; it will be law--Parliament will question the Chancellor of the Exchequer or will Parliament question someone else?

Baroness Hollis of Heigham: If it was a case of the millennium bug affecting the accurate and reliable collection of information from employers--analogous to the similar problems we are having with NIRS--it will ultimately be the parliamentary responsibility of the Paymaster General as and when the day-to-day running has been transferred. If I receive any different information in relation to the millennium bug problem I shall write to the noble Lord. I add that qualification because I suspect that there is also a parallel responsibility with the Cabinet Office--the overall responsibility for the millennium bug and computers. The direct line will be through the Paymaster General.

Clause 2 agreed to.

Schedule 3 [Transfer of other functions to Treasury or Board]:

Lord Higgins moved Amendment No. 15:


Page 28, leave out line 20.

The noble Lord said: On reflection it may not be necessary to pursue Amendments Nos. 15 and 16. They are linked with Amendment No. 17.

This section refers to the earnings limit for Class 1 contributions. The Minister will not be surprised therefore to hear that my concern is in relation to the situation with regard to contributions which we debated on a number of occasions on the Social Security Bill; namely, the fact that the level has been raised for employers but not yet for employees. The noble Baroness will recall that we debated this last year at some length.

14 Jan 1999 : Column 298

I am not clear whether or not it will be possible for that limit to be changed under this part of the Bill simply by regulation rather than in a way in which it could be amended. Perhaps I can spell out my worry. The noble Baroness will recall that, last year on the Social Security Bill, the Chancellor of the Exchequer announced that he was raising the contributions level for employers and said that subsequently he would raise it for employees. That was debated quite controversially at considerable length. Is it possible under this part of the Bill to do that by regulation rather than primary legislation? I beg to move.

4.45 p.m.

Lord Renton: Before the noble Baroness replies, I wish to add a slightly different point to that made by my noble friend Lord Higgins. In these three amendments there is an intention to make the Government think again about whether the Treasury rather than the Secretary of State or any other individual Minister should be made responsible for this secondary legislation. When we look at lines 26 and 27 on page 28 of Schedule 3, we find that the Government wish to insert the words,


    "Regulations under subsection (2)(a) above shall be made by the Treasury with the concurrence of the Secretary of State".

That expression occurs again in lines 34 and 35. What is the difference between regulations made by the Treasury without the concurrence of the Secretary of State and regulations made by the Treasury with the concurrence of the Secretary of State? In any event, is not the Chancellor of the Exchequer the Minister responsible when the Treasury makes regulations even on a Social Security Contributions (Transfer of Functions, etc.) Bill?

This is a matter of constitutional importance which we need to consider now that the Bill is before us. I believe that there are precedents. I have not turned them up but at the back of my mind I seem to remember that, though they are not frequent, precedents do exist for these expressions. Surely our main object in our parliamentary democracy must be to have a Minister rather than officials responsible to Parliament for every piece of legislation delegated to a Minister. Therefore, in the course of the proceedings on this Bill through your Lordships' Chamber, we should try to get the matter right.

Baroness Hollis of Heigham: Though the noble Lord, Lord Higgins, was particularly interested in Amendment No. 17, he moved Amendment No. 15 and therefore it is important that I seek to reply to that.

The noble Lord, Lord Higgins, was among those who welcomed the Explanatory Notes published with this Bill, and I surmise that those notes helped him to devise amendments targeted at the principle of the policy transfer.

Paragraph 66 of the Explanatory Notes states:


    "Paragraph 1 transfers to the Treasury powers in section 1 to make regulations relating to the basic structure of the NICs regime, the rates of different categories of contributions and who is liable to pay them".

14 Jan 1999 : Column 299

Taken together, the first two amendments of this group would gut this first paragraph of Schedule 3. The first seeks to maintain the annual re-rating of contributions levels as a DSS rather than a Treasury function. The second would retain with DSS the power to regulate residence requirements for NICs, and the power to allow people to pay NICs even though they are not liable to pay them; and the third would leave with DSS the annual adjustment of the lower and upper earnings limits for primary Class 1 NICs and the earnings threshold for secondary Class 1 NICs. In those circumstances, I suspect that the noble Lord will regard these as probing amendments.

As I am sure the noble Lord is aware, these amendments would not of themselves produce coherent results even as far as these functions are concerned. Amendments later in this schedule--paragraphs 44 to 50--transfer to the Treasury the current DSS responsibilities for laying orders on contribution rate changes to keep the NIF in balance. The responsibility for keeping the NIF in balance would, under the Bill, still pass to the Treasury--even the amendments seek to keep with DSS the tools controlling NIF income and expenditure.

One of the Government's main drivers is our welfare-to-work agenda. We think this means that responsibility for contributions rates as well as tax rates should pass to the Chancellor of the Exchequer, to put both those determinants of work incentives into the same hands. The amendments would block that high-level strategy.

Some employers and tax practitioners are keen that we should address differences between the tax and NICs rates for residence, as well as how these rates are operated within the Inland Revenue and the Contributions Agency. We would be happy to discuss that with them. But, whichever officials and Ministers lead on any discussions, they would need to be alive to the benefit entitlement implications as well as the convenience of employers. Accordingly, I do not see the case for separating the residence tests from other issues affecting contributions liability.

I turn to the point about the lower earnings limit. In his last Budget, the Chancellor of the Exchequer made clear his aim of aligning the lower earnings limit with the single person's tax allowance - although of course he had no proposals about alignment with income tax of the upper earnings limit. Noble Lords will recall the amendments to the Social Security Bill to achieve this as far as employers are concerned. As far as employees are concerned, this, rightly, needs to wait for the Chancellor's proposals on increasing the lower earnings limit without depriving people of benefit entitlements--that is, those who currently receive benefit while the LEL is at £64 but who might otherwise be vulnerable if it moved up to align with the single person's tax allowance.

Nevertheless, Parliament has already agreed the principle of alignment. As noble Lords will know, decisions on the single person's tax allowance are of considerable budgetary significance. Accordingly, this

14 Jan 1999 : Column 300

hardly seems the time to separate decisions on the lower earnings limit and the earnings threshold from other matters to transfer to the Treasury.

Given the Government's strategy of alignment, it is inevitable that the Treasury will have an even closer involvement in determining the LEL and earnings threshold than hitherto. Separate decision-making will not give employers the reassurance they reasonably seek that alignment will be maintained.

The noble Lord, Lord Higgins, also asked a specific question about the relative responsibilities and regulations and what needs to have parliamentary approval. We can make full alignment only by primary legislation. Once that is passed, as is customary in all such financial matters, regulations will give the power to increase or decrease the figures. That is a fairly standard procedure.

The noble Lord, Lord Renton, was concerned about some of the constitutional issues involved. Existing social security legislation already requires some powers of the Secretary of State to make regulations to be exercised with Treasury consent; for example, Section 189(8) of the Social Security Administration Act 1992. I do not think that this is a constitutional novelty. It seems to us to be a sensible way to proceed. In the light of those remarks, I hope that the noble Lord, Lord Higgins, will feel able to withdraw his amendment.


Next Section Back to Table of Contents Lords Hansard Home Page