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Lord Higgins: I support my noble friend's amendment. Indeed, I have tabled a similar amendment. Neither of us wish to enter the process of enumeration of companies which are all right and those which are not. Our experience on the selective employment tax, which together we abolished, suggests that such enumeration is not a good way of tackling the problems.

It is clear from one's enormous mailbag that particular industries will be badly hit by the Government's proposals. To the extent to which the Minister is successful in his search for a solution which does not damage companies which are not tax avoidance companies, but legitimate and no doubt entrepreneurial enterprises, we hope that that matter can be clarified. We must ensure that we remain competitive and that people are not driven overseas in the IT industry, and that people are comparatively mobile.

The Earl of Kintore: If the amendment is accepted another body of people--that is, the highly-skilled workforce searching for oil in the North Sea--would ask for similar treatment. I shall speak about them at some length during the debate on Clause 70. Surely, what is suggested in the amendment is a last gasp solution and we should be trying to resolve the problem.

Lord McIntosh of Haringey: I can give the assurance which the noble Lord, Lord Jenkin, seeks; that we shall pay particular attention to the representations made about the information technology industry. However, I have two qualifications to make. I am not sure that the phrasing of the amendment is an adequate definition of what is meant by "information technology industry". On that basis alone, I could not accept the amendment as being part of the Bill.

Secondly, although I recognise that there are considerable numbers of people who install and service domestic PCs on a one person basis--I have employed such persons, if "employed" is the correct word--much of the talk about the IT industry is about small service companies with several employees. Such companies will

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need several employees if they are to provide an effective service to business. They will have to pay national insurance contributions and deduct PAYE.

I have a feeling that some of the representations have been somewhat exaggerated or over-played. If the noble Lord is seeking an assurance that we shall pay particular attention to the needs of the IT industry he can certainly have that assurance.

Lord Jenkin of Roding: With that assurance, I seek leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 140A not moved.]

Lord Higgins moved Amendment No. 140B:


Page 77, leave out lines 3 to 11

The noble Lord said: I apologise for the late arrival of this starred amendment on the Order Paper. I had not spotted subsection (9) on page 77 which gives me some cause for concern. I referred to it in debates on earlier amendments.

The subsection raises the broad issue that we discussed earlier as to the exact relationship in such matters between the Treasury, the Chancellor of the Exchequer and the Inland Revenue on the one hand, and the Department of Social Security on the other. As the noble Lord said, had these matters been put in a Finance Bill the Committee would not have had the opportunity of debating them in detail as we have done this evening.

I would like clarification of whether it is envisaged that there will be a further set of clauses related to these matters in a subsequent Finance Bill. I had received the impression--I know not how--that that is to be the case. If that is not the case, it will remain true that the other place has not had a chance for detailed examination of these proposals. None the less, I believe that it is right that they should have a further opportunity. We shall need to take into account the results of the consultation that the noble Lord, Lord McIntosh of Haringey, has mentioned.

Secondly, I seek to clarify the point that the noble Lord has made about whether the proceeds will go into the Consolidated Fund or into the National Insurance Fund. I have already stressed that as the Contributions Agency has moved to the Treasury, it is not clear why the Treasury should not take a lead in such matters rather than the Department of Social Security. Clause 70 says that:


    "the Treasury may with the concurrence of the Secretary of State by order make such modifications of the preceding provisions of this section as the Treasury think appropriate for that purpose".

If I understand the matter correctly, the Treasury--the noble Lord rightly distinguished between the Inland Revenue and the Treasury--in the guise of the Chancellor of the Exchequer, can make an order which will alter the provisions in the clause that we are now debating. That seems to me to be a rather extraordinary situation. If that were to be the case, one would have expected there to be a Treasury provision in the first place. Certainly priority is given to the Treasury, with the concurrence of the Secretary of State, rather than the other way around.

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In regard to where the money goes, if I understand correctly, the noble Lord is saying that as national insurance contributions are being avoided, the money should end up in the National Insurance Fund. But this is purely a book-keeping operation. The National Insurance Fund does not exist in any particular sense. It is true that some of its revenue comes from national insurance contributions, but a large chunk comes, and has always come, from other sources of revenue. I remain puzzled as to why the noble Lord believes it important that money should go into one fund rather than another. It would be helpful if he could clarify exactly what the division of responsibility is between the Treasury and the Department of Social Security.

10.45 p.m.

Lord Jenkin of Roding: I would like to raise a slightly different point. As stated by the Select Committee on Delegated Powers and Deregulation in its 17th Report in the current Session, at paragraph 9,


    "Subsection (9) of the new Section 4A is a Henry VIII power allowing the modifying of the section to assimilate the law relating to income tax and the law relating to contributions. An order under this subsection is subject to negative procedure".

As I read the report of the Select Committee, on balance--the wording is quite significantly gentle, it is not very definite--it considers the negative procedure appropriate. It is right to look at the language. It says,


    "As we understand it, this power can be considered to be consequential on the provisions which Parliament will consider when the Finance Bill is introduced and we understand that that Bill could not be used to bring about this assimilation".

Pausing there for a moment, I believe that is the point that the Minister was making in an earlier debate: one cannot put social security legislation into a Finance Bill. Is that not the point? Is the Minister shaking his head?

Lord McIntosh of Haringey: The Finance Bill cannot be concerned with national insurance contributions which go into the National Insurance Fund. It really does not matter whether it is social security or Treasury, the point is whether it is the Consolidated Fund or the National Insurance Fund. I shall respond to that in more detail in a moment.

Lord Jenkin of Roding: The Select Committee goes on to say,


    "Moreover, the power is for a limited purpose and is not capable of being used for a wider purpose".

I question whether in these circumstances the negative procedure is right. I normally have the greatest respect for the Select Committee on Delegated Powers and Deregulation, but on this matter it is possible that it has missed a trick. This is quite an important point and it should be properly debated by Parliament. I shall listen with interest to the Minister's reply.

Lord McIntosh of Haringey: I am grateful to the noble Lord, Lord Jenkin, for quoting from the report of the Select Committee on Delegated Powers and Deregulation. But he quoted from it in little chunks with interventions. He used either his own words or those in

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quotation which did not fully represent the position. The only safe thing for me to do is to quote from paragraph 9 of the report:


    "Subsection 9 of the new section 4A is a Henry VIII power allowing the modifying of the section to assimilate the law relating to income tax and the law relating to contributions. An order under this subsection is subject to negative procedure. As we understand it, this power can be considered to be consequential on the provisions which Parliament will consider when the Finance Bill is introduced and we understand that that Bill could not be used to bring out this assimilation. Moreover, the power is for a limited purpose and is not capable of being used for a wider purpose. The Committee therefore considers the negative procedure appropriate".

The noble Lord, Lord Jenkin, used the words "on balance" as though the committee was using them. It does not. It understands the position to the best of its ability and it is satisfied with the powers which are being given. We in government get into terrible trouble if we try to go against that committee. We get torn apart, but here we are agreeing with it and the noble Lord does not like that. He had better get himself nominated to the committee and stiffen up its act if that is what he feels is appropriate. I shall rest on the approval of the committee so ably chaired by the noble Lord, Lord Alexander of Weedon.

Amendment No. 140B would remove subsection (9) of Clause 70 which provides a power to enable the clause to be adapted by order if the parallel tax provisions introduced in next year's Finance Bill differ from what is envisaged by the clause. I can assure the Committee that there is no sinister purpose behind the inclusion of subsection (9) in Clause 70; it is simply a necessary provision to ensure that the powers in the clause operate effectively.

There are two reasons why the subsection is needed. First, NICs are not as flexible as tax about when a provision comes into force. NICs' liability is geared to a worker's pay period, be it weekly or monthly; any NICs legislation must be introduced prior to the start of the tax year. The Welfare Reform and Pensions Bill allows for such a timetable to be met. But the provision for tax in the Finance Bill next year--2000--will not be ready for this timetable. It is therefore important for us to be able to amend the detail of the NICs provisions to take into account any detailed changes in the tax rules. I am sure that Members of the Committee understand the need for business to operate to one set of rules rather than two.

Secondly, the subsection gives flexibility to keep the NICs measures in line with the tax rules. The annual Finance Bill means that changes to the tax legislation can occur every year subject to parliamentary approval, but there is no equivalent annual legislation automatically available for the national insurance legislation. So without the subsection it would be difficult to amend the contributions and benefits Act to mirror any necessary changes in the Finance Bill.

The noble Lord, Lord Higgins, again raised the question as to why NICs legislation cannot be included in Finance Bills. As I said before and can only repeat, it is a convention of Parliament that Finance Bills are restricted to tax provision. Tax revenue is paid into the Consolidated Fund. Contributions are not a tax and are paid into the National Insurance Fund. It seemed to be

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suggested that somehow this is a polite fiction. The National Insurance Fund is necessary to pay benefits. At the moment it is broadly in balance, but there were a number of years under the noble Lord's government when it was not in balance. There was a deficit in the National Insurance Fund. We have corrected that situation. The National Insurance Fund is now a proper fund which does what it is supposed to do. It is still the position that the tax provisions of Clause 70 will be introduced through the Finance Bill because they are in the Consolidated Fund, but the NICs provisions will not. That is why we have to have this secondary power provided by subsection (9) of Clause 70.


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