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Lord McIntosh of Haringey: That is certainly one of the many tests in the Schedule D/Schedule E issue. My interviewers were not employed only by me, they were employed by a number of different market research companies and I still paid national insurance contributions and deducted PAYE for them and I have no doubt their other employers did the same. This is not a new issue, it is one that has been going for a very long time. However, the noble Lord is right, it is of course one of the issues which has to be taken into account.

Lord Higgins: When the noble Lord reads Hansard tomorrow, he will find that, while covering what I said

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was effectively a Second Reading speech because the issue needed that, I referred specifically to Amendment No. 137, and the noble Lord, Lord Goodhart, did as well. We remain puzzled by exactly what the attitude of the noble Lord is to this amendment. He says that this will be covered in consultation in the course of the following months. None the less, it seems to us that the Government must have some view on whether this amendment meets the case. What they do not appear to have done at the moment is to make any argument in favour of having an additional definition of "employee" other than that which already exists.

Lord McIntosh of Haringey: I thought it was clear from what I was saying that I was acknowledging with reluctance the difficulty of a uni-dimensional test--the test only of control. Everything I have said has acknowledged that difficulty. Amendment No. 137 adds another dimension. Our response to the consultation process is considering not just this additional dimension but the other dimensions referred to in debate. We have to remove the avoidance. But the mechanics of how we remove the avoidance are not set in stone. If there is an alternative approach which business believes is more sympathetic and yet delivers our policy, we will consider it favourably. That is my response to Amendment No. 137 and indeed it is my response to all of the amendments to Clause 70.

Lord Higgins: We shall return to these matters on subsequent amendments and no doubt again at Report stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

10.15 p.m.

Lord Higgins moved Amendment No. 138:


Page 75, line 9, at end insert--
("( ) Regulations shall not be made under this section until the Secretary of State, following full consultation with all interested parties, has laid before Parliament a regulatory impact assessment which, amongst other matters, assesses the implications of the proposed regulations for economic activity within the United Kingdom.")

The noble Lord said: This amendment suggests that regulations shall not be made until the Secretary of State, in full consultation with all interested parties, has laid before Parliament a regulatory impact assessment, which, among other matters, assesses the implications of the proposed regulations for economic activity with the United Kingdom.

In reply to the previous amendment, the noble Lord said that there will be full consultation. We appreciate that. However, having said that, we turn to the question of the regulatory assessment. While the other place did not have the benefit of that, we have had it. But it is narrowly defined in terms of the impact on individual companies and so on. Many of the representations that we have received from a vast range of interests--interests which have only an abstract concern rather than an individual company financial interest--suggest that the effect on the UK economy may well be serious, not least in areas where the greatest initiative is shown; for

20 Jul 1999 : Column 926

example, the IT industry. Therefore, I hope that the Minister can accept the amendment so that we shall have a supplementary regulatory assessment which, in the light of the discussions mentioned by the Minister, will spell out all the concerns expressed by the various outside bodies. In one of the noble Lord's several winding up speeches on the previous debate he said--

Lord McIntosh of Haringey: I had to make more than one winding up speech because more than one noble Lord intervened.

Lord Higgins: At this time of night there is always the danger that it becomes a conversation rather than a debate. I was not criticising the noble Lord for the fact that he made about five winding up speeches, but in one of the earlier ones, if I may put it that way, he made it clear that the Government are determined to deal with the problem of tax avoidance in that area. We can understand that. But he seemed to imply that they had to deal with the problem of service companies. I hope he will accept that many service companies are entirely legitimate, they fulfil an important and useful function and give to the economic market a degree of flexibility which it would not otherwise have. Having said that, we will need to go into the matter in considerable detail later on. I hope that the noble Lord can accept the amendment. I beg to move.

Lord Jenkin of Roding: I shall be extremely brief. At the Report stage in another place on 17th May the Minister, Mr Timms, said:


    "A regulatory impact assessment will be issued in due course, once the details of the practical application of the new rules have been finalised".--[Official Report, Commons, 17/5/99; col. 756.]

That is exactly what our amendment says. I look forward to hearing that the Minister will accept it.

Lord McIntosh of Haringey: At least the noble Lord, Lord Higgins, recognised that the regulatory impact assessment had been published. I am sorry that it has not come to the attention of the noble Lord, Lord Jenkin, but I am sure that we can send him a copy.

In direct response to the noble Lord, Lord Higgins, I do not accept his criticisms of appendix 6 of the regulatory impact assessment. It goes into the details of the costs of operating individual service companies and complying with new legislation on a micro-basis, but it also makes assessments of the macro-costs and talks about the estimated extra NICs revenue which arises from a change of this kind. It estimates the number of service companies, some but not all of which may well be genuine service companies, in the past and their growth in recent years. I thought that I had already made it clear in one of my winding-up speeches that the Government recognise that there are genuine service companies.

From what I have said about our response to the consultation and the representations that have been made, it is quite clear that we are considering the possibility--I shall not go further than that--of making changes to the provisions of Clause 70. If that is the case, then clearly a regulatory impact assessment will

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be a necessary part of our response. Rather than introduce an amendment at this stage, I ask the noble Lord to accept my assurance that any changes will be accompanied by an appropriate regulatory impact assessment.

Lord Higgins: The noble Lord accepts that there are genuine service companies which are not tax avoidance vehicles and fulfil a useful function. Does he also accept that implementation of Clause 70 as it is now may well wipe out some of those perfectly reasonable companies?

Lord McIntosh of Haringey: I am not prepared to say that. I believe that Clause 70 properly addresses those service companies which are designed primarily for tax avoidance purposes. Clearly, there could be difficulties at the margin if the uni-dimensional control criterion did not apply effectively, but it is not right to say that Clause 70 as drafted would affect genuine service companies. Certainly, that is not the intention.

Lord Higgins: One well understands that that is not the intention. I pose the question again: is it the case that Clause 70 as now drafted may well adversely affect, if not eliminate, perfectly legitimate service companies that have no connection with tax avoidance?

Lord McIntosh of Haringey: I have no reason to believe that that is the case. The objections to Clause 70 that have been raised in the consultation have not been concerned with that specific point.

Lord Higgins: I find that response rather extraordinary. The whole of the agitation on the part of individual companies and all the bodies concerned, none of which is in favour of tax avoidance, is that the shotgun approach adopted by the Government in Clause 70 will adversely affect perfectly legitimate companies. Therefore, I find the reply very strange. Nevertheless, I seek leave to withdraw the amendment. No doubt we can return to these matters.

Amendment, by leave, withdrawn.

Lord Higgins moved Amendment No. 139:


Page 75, line 9, at end insert--
("( ) Regulations under this section shall not apply to any circumstances where the worker is entitled to delegate the whole performance of the services to another person, or where the third party is entitled to nominate someone other than the worker to perform the whole of the services.")

The noble Lord said: Amendment No. 139 in my name and those of my noble friends, including my noble friend Lord Jenkin of Roding, proposes that,


    "Regulations under this section shall not apply to any circumstances where the worker"--

that is a term of art in this context--


    "is entitled to delegate the whole performance of the services to another person, or where the third party is entitled to nominate someone other than the worker to perform the whole of the services".

The amendment seeks to ensure that regulations do not affect companies where the individual concerned is clearly a company and not a personal employee of the

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client, or where the client is entitled to say that someone other than the worker performed the service. We hope that the provision is helpful and that the noble Lord can accept the amendment in seeking to avoid some of the shotgun effect to which we have just referred. I beg to move.


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