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Richard Younger-Ross (Teignbridge): I support the new clause and the amendments grouped with it and want particularly to discuss further the effects on employers. As the hon. Member for Arundel and South Downs (Mr. Flight) said, the Liberal Democrat and Conservative amendments differ only in detail rather than principle. The principles are one and the same.
I have looked up some figures on small businesses. Although I do not have a figure for the number of businesses that employ 15 or 20 people, 83 per cent. of companies employ 10 people or fewer. It might be argued that if 83 per cent. of businesses were exempted from the proposal it would have a dramatic effect, but it would not, because only about 20 per cent. of employees would be affected. Therefore, it is possible, and with minimal effect, to encourage enterprise and remove a burden from a very large number of businesses.
Let us consider the overall cost of the burden on small businesses, which is constantly growing and never seems to diminish. The British Chambers of Commerce has compiled figures from the regulatory impact assessment prepared by the Government. The total updated cost, until May 2002, now runs to £15.6 billion. The working tax credit will cost some £262 million and the student repayment loananother burden on small businesses£255 million. Businesses, especially small businesses, are bearing heavy burdens that have an effect on the ability to grow and progress.
Some 90 per cent. of Government revenue is collected by businesses. Employers are responsible for statutory sick pay and maternity pay administration. Family-friendly schemes introduced in the past two years such as the Employment Relations Act 1999, the working time directive, the Data Protection Act 1998 and the national minimum wage, which I support in principle, are all burdens on businesses, and on small businesses in particular.
Mr. Webb: Lest my hon. Friend be misunderstood or misquoted, I presume that he is drawing a distinction between measures such as the minimum wage, which we supported and which are beneficial, and tax credits, which can be delivered other than through the pay packet. Whereas the minimum wage can be delivered only in that way, tax credits need not be a burden on business.
Richard Younger-Ross: I am grateful to my hon. Friend for drawing that distinction. I am not saying that we do not support some of those measures, the burden of which must be borne by business, but we must consider the overall burden; if it is not necessary for business to bear a particular burden, it should not have to do so. Small businesses can therefore be exempted and encouraged. We must look at the total picture and not consider such matters in isolation.
America has, in principle, exempted businesses by using the standard of turnover of less than $500,000. Alternatively, companies that employ fewer than 15 people or fewer than 20 people are exempt from certain legislation. That proves that such measures can be achieved in an enterprise culture.
In France, small businesses hold a nominal percentage of the tax collected to help them with the tax collection burden. The cost of tax and national insurance collection for large UK companies with more than 5,000 employees is about £5 per employee. The cost for companies employing between 1,000 and 5,000 people is about £30 per employee. For companies with between 500 and 999 employees, the cost is about £29 per employee. However, the cost for very small companies with between one and four employees is an astronomical £288 per employee.
Devon has many small businessesabout 37,000. More than three quarters of employers throughout Devon have fewer than 10 employees. I want those businesses to thrive, prosper and grow, but they will not do so if we increase the burden on very small businesses. Instead of being able to climb the mountain of success, they will come across a rock face that they find hard to scale. Progressing from being self-employed to employing others should be made as easy possible, so I ask the Government to consider their response to the amendments carefully.
Mr. Hoban: I welcome the grouping of the new clause and the amendments, because together they point up one of the issues at the heart of the Bill: the obligation on businesses to pay working tax credit, leading to a high burden on employers. Employers have to bear the cost of administration of working tax credit only because they are required to pay that credit to their employees.
Let me remind the House of the burdens that the Government have placed on businesses. The cost of the Bill, as set out in the regulatory impact assessment, is about £90 million. I welcome the reduction compared with the previous regime, but it is still a significant cost on business. Employers face a problem. In a survey conducted by the Association of Chartered Certified Accountants in July 2001, 97 per cent. of respondents felt that the burden of payroll compliance had increased since April 1997, and 78 per cent. referred specifically to the administration costs of the working families tax credit.
The real cost falls on smaller businesses. The average payroll cost per head for a business with between one and five employees is £288. That is a terrific cost when compared with the cost for businesses employing more than 5,000 employees, which averages at about £5 a head.
I am especially interested in amendment No. 16, which has the deficiencies that my hon. Friend the Member for Cities of London and Westminster (Mr. Field) highlighted earlier. By setting a limit of 15 employees, it would create an artificial barrier to taking on additional employees. That stands in contrast to amendment No. 14, under which the Board of Inland Revenue would refund employers' costs but which has an opt-out provision for companies with fewer than 20 employees, whose tax credits would be paid directly by the Inland Revenue.
It is a shame that amendment No. 14 is needed at all, because I would much rather the Government did not impose this burden on businesses, but by requiring the Inland Revenue to reimburse the costs it would demonstrate to the Government once and for all the true cost of compliance. Far too often, the Government impose burdens on business without understanding the true cost. Estimates are published in regulatory impact assessments that are riddled with caveats and assumptions. The amendment would lift part of the £90 million burden from business, and the other part of the burden would disappear for businesses with fewer than 20 employees.
My hon. Friend the Member for Arundel and South Downs (Mr. Flight) referred to the consultations between employers and employees concerning whether benefits should be paid directly to employees by the Inland Revenue, rather than by the employers. Some people have a problem with tax credits being paid through payroll services, because they want to separate clearly their
The hon. Member for Somerton and Frome (Mr. Heath) referred to post offices. Too often in debates on post offices, people refer solely to the rural post office network and the sub-post offices there. Those of us who represent urban areas also have a network of sub-post offices that we wish to sustain. That is an important factor to be borne in mind. The option to enable payment through post offices, either through the order book system, which will act as a failsafe in case the universal bank does not come into effectas seems increasingly likelyor through such a bank account, will generate the traffic that sub-post offices in urban and rural areas need to sustain their business.
Quite often, the shops are not just a post office counter but provide a wide range of services and are a valuable local amenity. Any measure that will improve the traffic flowing through the sub-post offices is valuable.