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I first became interested in this clause just before the Committee stage on 20th July and I had prepared quite a good speech to make then. I refrained from speaking as the Minister suggested a meeting during the Recess to try and thrash out some of the problems (col. 938 of Hansard). In my innocence I really expected the meeting to take place and for organisations, such as the Professional Contractors Group, to be invited to give us the benefit of their considerable experience of the practical application of the proposed law and regulations for contractors, and to suggest improvements. The meeting did not take place. I concur with the remarks of the noble Lord, Lord Higgins, on what did take place.
Even as amended, this clause shows a lack of understanding of how the North Sea oil search works. The major oil companies, such as Shell, are oil producers and not engineering companies. When they want to exploit an oilfield they put out contracts to the major contractors such as AMEC, Brown and Root, and the Wood Group. The contracts will cover everything that is necessary to get the oil to flow.
The major contractors will have permanent staff to enable them to bid for contracts--they win about one in five--and once they have a contract they will need extra staff for all or part of the contract, which could last between six months and three years. These extra staff will be supplied either by a specialist agency or they will be individuals who have advised the major contractor of their special skills. Neither the main contractor nor the agencies will take the extra staff onto their employed payrolls as they will have the problem of firing them once the contract is completed. So a perfectly sensible system has evolved whereby individuals are prepared to live by their wits and bid to work on any contract which needs their expertise.
Many of those individuals probably offer their expertise through personal service companies and, when working, command high salaries. But those salaries have to keep them going while they are not in work. There have not been too many contracts in the North Sea recently, so there are some rather hungry individuals about who may indeed have arranged their affairs, quite legally, to pay as little tax and national insurance as possible. But it is the proud boast of those kinds of individuals that they do not go on the dole when they are out of work. They make their own pension arrangements, and probably have private medical insurance. So where is the mischief to the
If the Government make operating through an intermediary so unattractive, there is a danger, particularly in the oil industry, of the intermediaries going abroad. It is a world-wide industry, and there are plenty of other countries that would be only too happy to have the skills that Aberdeen can provide. If one major professional contractor left Aberdeen, the rest would probably follow. The result would devastate the city's economy and, although it is of no concern to this Parliament, would cause severe difficulties for Aberdeen City Council, Aberdeenshire council and, I hope it is in order for me to say, the Scottish Parliament.
I could go on, but it is late. I hope that, even at this late stage, the Government can be persuaded to withdraw this clause. If they will not, I hope that the noble Lord, Lord Higgins, will consider testing the opinion of the House on Amendment No. 184.
Lord Campbell of Croy: My Lords, in introducing the government amendments, the noble Lord, Lord McIntosh of Haringey, described the changes that have been introduced since the Committee stage. In addition, a revised regulatory impact assessment has been published this month. I was invited to the seminar in London but I could not possibly get to it at short notice from northern Scotland because of my engagements there.
The issue of employment through personal service companies, known as intermediaries, needs to be examined carefully. I think we are all agreed on that. I agree with the remarks of my noble friends Lord Higgins and Lord Jenkin and I shall not expand on them. The original proposals would have penalised entrepreneurial enterprise--the opposite of New Labour's declared aims. I am advised that the revised version is likely also to cause damage. I am told that it could make matters worse for small businesses. The most vulnerable are those offering information technology and computer software services.
Since my remarks in Committee, I have received many complaints about this clause. It is surprising how many areas of our national activities it affects, especially where specialist work is required by a firm for only a few months. I endorse what my noble friend Lord Higgins said. Of course, we do not condone deliberate attempts to avoid national insurance contributions and PAYE. Besides the information technology industry, there are other industries and professions which are affected. An example which has been mentioned is the North Sea oil and gas industry. Its engineering and other specialist requirements offshore mean that specialists come only for a short time to do particular jobs. It would be cumbersome and unnecessary for individuals to have to be taken onto the roll of the companies concerned just for a few weeks or a few months. It does not make sense for them to be directly employed by the larger firms in that industry.
There is also a fear about partnerships in general which provide consultancy services to various industries. That takes us into the professions. There are worries about accountants, doctors, architects and other professions. That kind of approach could lead to problems in those areas too.
Small enterprises might have to go out of business. That is where foreign competitors would gain advantages. The noble Lord, Lord McIntosh, pointed out that foreign competitors have to follow the same rules and would not be able to produce one-man companies. If our small companies go out of business, that is where the foreign competitors could gain.
There is much concern about the clause in sectors which are important to the British economy and, where the oil and gas industry are concerned, particularly Scotland and the north-east of Scotland. The noble Earl, Lord Kintore, spoke about that so I shall not say more. He and I both know the situation in northern Scotland, and it could be a devastating setback for the economy there, and also for Britain as a whole, if the oil and gas industry were to suffer greatly from these changes.
Lord Hughes of Woodside: My Lords, I had no intention of speaking in this debate until I heard the two noble Lords from the north-east of Scotland. If I had any doubts about the need for the clause before, I have none after hearing their speeches. What was apparently a fairly minor point now spreads to the extent that doctors, technology and the whole of the North Sea oil industry are in danger of collapse because of this amendment. Are they really trying to persuade this House that an amendment dealing with national insurance contributions will end the North Sea oil industry? I have never heard such bunkum in my life and I hope we are not going to listen to it.
Lord Campbell of Croy: My Lords, I do not know how long the noble Lord has been in the Chamber, but he has got hold of completely the wrong end of the stick. This provision was introduced in the other place as a new clause, but it is a major change, proposing major alterations. It is not something to be dismissed in the way that the noble Lord tries to do.
Lord Hughes of Woodside: My Lords, with due respect, noble Lords, certainly the noble Lord, Lord Campbell, have said in the House that the oil industry in the North Sea could--all right, he said could"--be at serious risk.
Lord Hughes of Woodside: My Lords, I believe the matter has been grossly exaggerated. The noble Lord may care to reflect that the Aberdeen Chamber of Commerce was reported as saying that the allegations that 17,000 people might have to leave employment in the North Sea and go to work in, of all places, the
Lord McIntosh of Haringey: My Lords, I take it that I have to reply to two kinds of objections in this fascinating debate. One is about process and the other about product, the real issue. The debate has been very heavy on process and rather light on product. On the basis of what I have heard, there has not been any convincing argument for the Government to agree to withdraw this clause.
I should like to deal first with process, which in my view is the less important issue. The Chancellor, quite unusually and with great regard for public consultation and feeling, announced a tax avoidance measure in advance. Normally, such a measure would be introduced in the Budget and there would be no opportunity for debate other than in Committee in another place on the Finance Bill. There would be no debate in this House and no opportunity to table amendments and give the matter the kind of consideration that noble Lords have given it. The Chancellor, with unprecedented concern for the public, announced this matter in advance. It was introduced at the first opportunity in another place at Report stage on the Welfare Reform and Pensions Bill.
I totally reject any suggestion that it would have been possible to introduce these amendments in Committee. They were introduced the first time it was physically possible to do so. Those amendments were available for debate. Admittedly, there was a guillotine, but they were debated in the other place in full in a way that, under the previous government, they would never have been considered in this House because of the principle, to which I adhere, that the Finance Bill is concerned with the Consolidated Fund, and the National Insurance Fund is a matter for other legislation.
The noble Lord, Lord Higgins, accuses me of poor consultation. I shall turn to that in a moment. I recall that he did not give me any notice of his bombshell of 23rd March 1987; nor did he emphasise that what happened in 1987 was for that Session only and that no government of either persuasion had sought to introduce it again. Perhaps it was thought not to be a very good idea and it would be better that the Finance Bill should be concerned with the Consolidated Fund and that matters concerned with the National Insurance Fund should not be taken out of the purview of this House. If that is what the noble Lord proposes, so be it. However, that would be the effect of what he proposes. That would certainly be the effect if this clause were removed from the Bill. It would not be considered at Third Reading, and I am not sure that it would ever come back again. We would have to introduce it in another way.
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