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Lord McIntosh of Haringey: My Lords, I am delighted to find my noble friend paying tribute to Article XIII of the Amsterdam Treaty, which is the only age discrimination legislation we have in this country. It has not yet been ratified. Once it is, it will allow the European Commission to put forward proposals to combat discrimination. But of course it would be subject to unanimity. I am sure my noble friend will take steps to ensure that it is subject to qualified majority voting.

Lord Carver: My Lords, may I confirm that over the past 14 years I have suffered from this discrimination? I have found it very difficult to hire a car in Greece, Italy and several other European countries and have therefore adopted the habit of taking the car by Motorail. However, the number of places to which one can do that is limited.

Lord McIntosh of Haringey: My Lords, the noble and gallant Lord makes it clear that this is not only a British problem. It is one which is properly addressed by the Treaty of Amsterdam. I am grateful to him for his comments.

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Organic Farm Scheme

2.59 p.m.

The Earl of Clanwilliam asked Her Majesty's Government:

    Whether there will be a cap limiting the extent of the subsidy payable under the new organic farm scheme.

The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Lord Donoughue): My Lords, since the introduction last month of the organic farming scheme there is no area limit on the subsidy payment to individual farmers entering the scheme because there is no longer a restriction on the area of land that they may enter. Financial provision for the scheme in 1999-2000 is £6.2 million.

The Earl of Clanwilliam: My Lords, I thank the Minister for that reply, and particularly for the support that the Government are giving to organic farming. However, does the Minister understand that the limit of £6.25 million has probably already been overtaken by those who are presently in the line of fire?

Does the Minister agree that in the light of the present controversy over genetically modified foods, however that may be considered, there is an enormous new demand for organic food and therefore a great demand, especially in terms of horticultural work, to stem the flood of imports from Europe?

Lord Donoughue: My Lords, I thank the noble Earl for his remark on what the Government have done. We have indeed doubled the amount of financial provision under our new scheme. The noble Earl is right to suggest that demand may run ahead of supply in this area. It seems to be the case that we have had as many applicants in the first two weeks of the new scheme as, on average, in each year since the scheme was first introduced in 1994. So funds may indeed run out for this year. However, the organic regulations that we laid earlier this year provide a mechanism for carrying applications forward until the following financial year.

Lord Middleton: My Lords, if the prospects are so rosy for organic farming, will the Minister explain why it needs subsidising?

Lord Donoughue: My Lords, I would rather discuss that matter with the noble Lord in the Tea Room afterwards. The schemes are CAP half-funded agri-environmental schemes. The case for funding is that it takes five years to convert, and in the early years there is a significant loss of revenue to the farmer who, for instance, may previously have been heavily subsidised under the arable area payments scheme. If he enters into organic farming, he loses that subsidy. He also has to deal with the heavy toxic state of the soil as a result of the heavy application of pesticides. We support the idea that that conversion should be

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subsidised in order to ease the cost. We subsidise only the conversion period, and our conversion rates are heavily front-loaded for that early period.

Lord Taylor of Blackburn: My Lords, is it my noble friend's intention to attend the public meeting on organic farming to be held in Ambridge this evening in "The Archers"? Will he be kind enough to offer advice as to which way matters should go?

Lord Donoughue: My Lords, I thank my noble friend for that question. Unfortunately I am informed that we have other business nearer home. However, I should be happy to talk to them about the dramatic success of organic farming in this country over the past year or so. A year ago, only 0.3 per cent of land in this country was organically farmed. The figure is now 1.6 per cent. That is well up the league table for Europe. So we have had success. There is a long, long way to go. Retailers are finding that demand is expanding at about 20 per cent a year; roughly 70 per cent of that demand has to be met from imports. It is our aim and hope that, in time, the rapidly expanding demand for organic food can be provided from domestic sources, where the profit premia are very high indeed.

Baroness Miller of Chilthorne Domer: My Lords, if that is the case, I find the Minister's reply quite cheering. Turning to the environmental measures that organic farming so ably supports, does the Minister agree that only about 3 per cent of agricultural spend in this country goes on such measures? Will he therefore look towards dramatically increasing the subsidy paid to organic farms on the basis that this type of farming is so beneficial for British wildlife? Consumers are voting with their pockets to support this approach. Will the Government do so?

Lord Donoughue: My Lords, it is true that the funds that are available specifically to support environmental measures in farming are still low. It was the Government's view that they should be increased. We argued for that in Agenda 2000, and we were not very successful. It is true that organic farming is an environmentally friendly form of farming, and we therefore support it. The conditions attached to receipt of grant include the highest possible environmental conditions; so support is provided in that way. Given the profit premiums--for lowland sheep there is a premium advantage of 90 per cent in returns, and hill beef has a premium advantage of 60 per cent, as does wheat--one has some sympathy with the noble Lord's previous remarks. Farmers are well encouraged under the new scheme to turn to organic methods. The available profits should be the biggest incentive.

Lord Luke: My Lords, some arable farmers have environmentally sensitive areas on their land. Is it true that such a farmer, wishing to go organic, does not qualify for subsidy unless he forgoes his ESA subsidy? If so, why?

Lord Donoughue: My Lords, it is not true. It is the case that double funding is not permitted under

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European Union rules. When the previous Minister, Jack Cunningham, circulated his review in anticipation of our reforms, it was clearly stated that double funding is not possible. Indeed, it is not desirable and I am sure that noble Lords would not wish to support it. There is a tapering of the organic farming aid scheme to take into account the ESA subsidy. But virtually all farmers will still be significantly better off by taking up the organic farm aid scheme. The average less favoured area farmer with an ESA, going organic, will still be some £200 per hectare better off. As I said, there is a tapering, a reduction of about 10 per cent for the best land, around 25 per cent in total return over five years for the slightly less good land, but farmers are still much better off. Of course, the ESA scheme is for 10 years and organic aid is only for five.

Protection of Children Bill

3.7 p.m.

Brought from the Commons; read a first time, and to be printed.

Business of the House: Debates, 6th May

Lord McIntosh of Haringey: My Lords, on behalf of my noble friend Lady Jay of Paddington, I beg to move the Motion standing in her name on the Order Paper.

Moved, That Standing Order 38 (Arrangement of the Order Paper) be dispensed with on Thursday next to allow the Motion on Kosovo standing in the name of the Lord Gilbert to be taken first.--(Lord McIntosh of Haringey.)

On Question, Motion agreed to.

Tax Credits Bill

3.8 p.m.

Baroness Hollis of Heigham: My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.--(Baroness Hollis of Heigham.)

On Question, Motion agreed to.

House in Committee accordingly.


Clause 6 [Payment of tax credit by employers etc.]:

Lord Goodhart moved Amendment No. 29:

Page 3, line 31, at beginning insert ("Subject to subsection (1A),")

The noble Lord said: I regret that the important and truly fascinating subject-matter of this Bill does not attract a full complement of Members of the Committee. I am sure that all those who are leaving have urgent matters to deal with elsewhere which makes it impossible for them to stay to hear the details that are

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about to be discussed. Perhaps the noise level has now fallen sufficiently to allow me to begin a little more seriously.

I rise to move Amendment No. 29 which is coupled with Amendment No. 32 which also stands in my name and that of my noble friend Lord Russell. These are amendments of very great importance. They give small employers the right to opt out of payment of the working families' tax credit rather than an automatic exemption. Dealing with it by way of an election eliminates two of the problems which the noble Baroness, Lady Hollis of Heigham, rightly pointed out at Second Reading. First, it is not easy for the Inland Revenue to identify which firms have fewer than 10 employees. However, if employers have to opt out, they will have the responsibility of providing evidence to satisfy the Inland Revenue of their right to opt out of paying tax credits through the wage packet.

The second problem arises where employers have employees of a number that fluctuates around the dividing line. Such employers would probably not wish to opt out because they would not want to stop and start payment of working families' tax credit. Therefore, it is certainly undesirable that there should be a fixed dividing line which means that they have to move in and out of payment of tax credits in that way. Providing for a right of election by the employer, rather than for an automatic exemption, will eliminate that problem. As an alternative, if for any reason the Government preferred it, we would accept a right of election based on the size of an employer's PAYE and NICs bill.

Another problem raised by the noble Baroness at Second Reading was disaggregation. She said that some employers threatened to divide their workplaces into small employment units. Subsection (1B)(c) of Amendment No. 32 is intended to block that by providing that the total number of employees employed by connected employers must be taken into account in deciding whether or not there is a right to opt out. I have not attempted to define "connected" in that context. Clearly, some definition would have to be provided. No doubt the Government could, if so minded, insert a definition of the necessary degree of connection.

I believe that the exemption of small employers would bring benefits to both employers and employees. We pressed this amendment in the other place. It is an issue on which we believe we are on very strong ground.

Let us consider employers first. The draft regulatory impact assessment which was prepared for the purposes of this Bill gives the figures. There are in total 1,170,000 employers. Of those, 670,000--well over half--employ between one and four employees and another 155,000 employ five to nine. That amounts to 825,000 which is nearly 70 per cent of the total. It is expected that some 730,000 employees will receive working families' tax credit, but of those only 70,000 are employed by employers with fewer than five employees and another 30,000 are employed by employers with between five and nine employees. Therefore, allowing employers with fewer than 10 employees to opt out, even if all of

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them exercised that right, would leave no less than 87 per cent of employees receiving their working families' tax credits from their employers.

The draft regulatory impact assessment estimated recurrent compliance costs at £24 million a year for employers with fewer than five employees and £11 million a year for employers with between five and nine. The statement went on to say that, averaged over all employers in the category of those employing fewer than five, the cost would be £37 per annum per employer. That does not sound very much. But, as I pointed out at Second Reading, paragraph 56 of the impact assessment states that only 10 per cent of employers in that group are likely to employ anyone in receipt of working families' tax credit.

As other employers will incur no compliance costs, or virtually none--the efforts of the noble Baroness to suggest that, in terms of reading the documents and so on, they would, seemed to me to be pretty unconvincing--the cost to each employer in this group who does pay the working families' tax credit will not be £37, but about £370 a year. Once again, the noble Baroness shakes her head, but that is the clear logic of the assessment. It states that it will cost £24 million a year for employers with fewer than five employees, of whom there are 670,000. On average, that works out at £37 per employer, but it is said that only 10 per cent will employ anybody who is in receipt of working families' tax credit. I see no alternative but to conclude--there is no reason to doubt it--that the cost per employer in that category of employing somebody in receipt of working families' tax credit will be £370.

The figures suggest that only one in five employers with between five and nine employees will have employees who receive working families' tax credit. The cost to those employers will be rather more than £370. It is not only a matter of cost, but of time and stress. We are not talking about larger businesses with trained bookkeepers and accountants, but about a farmer who works out PAYE and NICs on pay slips on a kitchen table at night after a day's work. I believe that to be a serious hardship.

What is the position of employees? They will lose nothing by allowing small employers to opt out. It is not like the exemptions for small businesses, for example, in relation to disability which deprive some disabled would-be workers of an opportunity to get a job because the premises do not have to be converted. Here, the employees will get exactly the same money whether the employer opts out or remains in the scheme; they will simply get it in two dollops instead of one. Allowing an opt-out will make it easier for people to get jobs.

The Government know that the working families' tax credit will be unattractive to smaller employers. That was why they included Schedule 3 to the Bill to protect employees or jobseekers who are victimised because of their actual or potential entitlement to the tax credit. It also appears to be unattractive to larger employers if the statement to which the noble Baroness referred at Second Reading is to be believed; namely, that if there were an opt-out at least some would be minded to divide their employment into small units.

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Therefore, if small employers cannot opt out they will try to avoid hiring anyone who they believe is likely to be able to claim the working families' tax credit. It has been suggested to me that small employers would be acting contrary to their economic interests in so doing because they would be reducing the pool of potential employees from which they could choose. But I simply do not believe that that has any significance in the context. Faced with the choice between two more or less equal potential employees, the employer will go for the one who will not cost the extra £370, or more time with a wet towel at the kitchen table.

There are other advantages to employees. Problems with late payment, non-payment or payment of the wrong amount are far more likely to arise with small employers than with larger employers with proper systems. Equally, privacy problems are more likely to be of concern to employees of smaller employers. While I accept that in practice privacy will not be a serious problem, many employees may think that it is.

Even from the point of the Inland Revenue, there are clear advantages in allowing an opt-out. Most of the problems will surely come from small employers. Most of the cases where the Inland Revenue has to fund payments because the tax credit exceeds the liability of the employer for PAYE and NICs will involve small employers. By allowing small employers to opt out, first, we shall save small business costs of up to £35 million a year in terms of compliance costs. Secondly, 87 per cent of employees will receive tax credits through their employers. Thirdly, we shall improve job seekers' chances of obtaining employment from small businesses. Fourthly, we shall improve bureaucracy for the Inland Revenue. I believe that the case for allowing the small employer to opt out is overwhelming. I beg to move.

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