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Standing Committee F
Tuesday 15 January 2002
[Mr. Joe Benton in the Chair]
Mr. Philip Hammond (Runnymede and Weybridge): On a point of order, Mr. Benton. I am sorry to be repetitious, but I must make a point of order similar to that which I have made in the previous two sittings. I have yet to see the new clause that the Government intend to table. Last week, the Minister said that he would try to table it by the beginning of this week, thereby enabling us to discuss it with outside bodies prior to its consideration in Committee next Tuesday, but that if he failed to do so, he would look sympathetically on a request that our deliberations be extended. Have the Government told you, Mr. Benton, when they expect to table the new clause?
The Chairman: I have received no such indication, and, strictly speaking, the matter is not a point of order for the Chair. The Minister might like to comment on it, however.
The Minister for Employment and the Regions (Alan Johnson): The normal protocol is that a new clause be laid the week before it is due to be debated, and I hope to be able to present the new clause to members of the Committee by one o'clock today.
Mr. Hammond: I am grateful to the Minister for that assurance.
Statutory paternity pay
Amendment proposed [10 January]: No. 129, in page 8, line 8, leave out from the word 'State' to the word 'is' in line 10 and insert the words
'shall, by regulations, provide that all statutory paternity pay and associated employers National Insurance Contributions, together with an amount calculated by the Secretary of State to equal the average cost to employers for each employee to administer'.—[Mr. Hammond.]
Question again proposed, That the amendment be made.
Alan Johnson: Good morning, Mr. Benton. Clause 2 relates to a part of the Bill that is not concerned with an employer's right to recover statutory paternity pay—an issue to which we will come when we discuss clause 7. I refer the hon. Member for Hertford and Stortford (Mr. Prisk) to that clause in respect of his previous question about adjustment of the recoverable element of 92 per cent. He will see that that provision is written into the Bill, so we would not be able to make such an adjustment. His question was right, but he asked it of the wrong clause.
Clause 2 deals with specific occasions when an employer's liability to pay statutory paternity pay is transferred to the Inland Revenue. We intend to provide for that in two circumstances: first, when an
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employer becomes bankrupt or insolvent; secondly, when he has failed to pay statutory paternity pay.
Mr. Mark Prisk (Hertford and Stortford): Do such circumstances include those in which companies are put into administration?
Alan Johnson: Yes. Such provision will be made if, for any reason, an employer is unable to meet his obligations in respect of statutory paternity pay. Where an employer should have paid statutory paternity pay but appears to have failed to do so, the Inland Revenue will first have to investigate the circumstances. Where it is satisfied that the employer was indeed liable, it will make a formal decision to that effect and write to the employer stating as much. The employer will then have the right to appeal against the decision. If he does not appeal, or if the appeal is unsuccessful and he continues to fail to pay statutory paternity pay, the Inland Revenue will take over liability and will make the payment direct to the employee. The same principle will apply to statutory adoption pay.
Mr. Hammond: I can see, in the light of the Minister's explanation of the purpose of this part of the clause, that the amendment appears to have missed the target somewhat. As he says, it would have been better applied to clause 7, but it is not at all clear from the Bill that the term ''liability to make payments'' relates only to a liability to make direct payments. I interpreted reference to the board's liability to make payments as reference to the ultimate funder of the arrangements, and I thought that the clause was providing for the Secretary of State to apply the 92 per cent. rule or the 100 per cent. rule. Is the Minister comfortable in his own mind that the words
''circumstances in which . . . liability to make payments . . . is to be a liability of the Board''
could not be properly interpreted to mean circumstances in which the board was reimbursing the employer through the pay-as-you-earn system?
Alan Johnson: Yes, I am satisfied that that is the effect of the Bill. The amendment would remove the Secretary of State's ability to specify circumstances in which liability to pay will fall on the Inland Revenue, so it would allow employers to do three things. It would allow them to recover, first, all the statutory paternity pay that they pay out, secondly, the associated employer's national insurance contributions and, thirdly, a further amount that would equal the employer's average administration costs. We already intend to do most of what the amendment calls for and, as I have said, the relevant provisions are in clause 7.
Mr. Hammond: Whether or not the amendment is in the right place, perhaps we can address the substantial point, which is that the whole cost of the statutory paternity pay scheme should fall on the state, the benefit being a social benefit, not a benefit to the employer. What estimate has the Minister's Department made of the full cost to the Treasury of meeting the obligations set out in the amendment—100 per cent. reimbursement plus national insurance contributions in all cases, together with an appropriate administrative fee?
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Alan Johnson: We have estimated that the cost would be around £60 million a year. That is an important point, although the amendment has been tabled to the wrong clause.
Let me deal with each element of the amendment, because one important principle about the cost of administering the scheme was raised by the hon. Members for Runnymede and Weybridge (Mr. Hammond) and for Hertford and Stortford. We have made it clear that employers will have the right to recover statutory paternity pay in the same way as they recover statutory maternity pay. All employers will be able to recover at least 92 per cent. of statutory paternity pay—the hon. Member for Runnymede and Weybridge said on moving the amendment that that is quite a large proportion—and small employers will be able to recover 100 per cent. Because of the changes that we have made elsewhere, more small employers will qualify than previously, which mirrors the position applying to statutory maternity pay.
It is perfectly reasonable to expect larger employers to demonstrate their commitment to employees taking leave to care for new families by funding a small amount of payments made to them while they are on paternity leave from work.
Mr. Hammond: Why?
Alan Johnson: We believe it right that they should do so. We apply the same principle to statutory maternity pay. Many of the best employers recognise that by topping up their statutory maternity pay schemes and are happy to bear the cost of doing so.
Mr. Hammond: On other occasions, the Minister has argued that employers should gladly bear a burden imposed on them by statute because it is in their own interests to do so. No matter how valuable paternity leave and pay are, however, they are clearly being imposed for the wider benefit of society as a whole. Does the Minister accept that, or is he suggesting that there is a direct benefit to employers from the proposed scheme for statutory paternity leave and pay?
Alan Johnson: The same argument—that 92 per cent. of costs should be recoverable—applies to statutory maternity leave, a provision introduced by a Conservative Government. There are benefits to employers in better staff morale, recruitment, retention and so on. However, the point that I am laboriously repeating—I am boring myself, never mind members of the Committee—is that we have sought to mirror the maternity leave provisions, so that employers faced with a woman seeking to take maternity leave and a man seeking to take paternity leave do not have to comply with two different sets of regulations. We have largely married them up.
Mr. George Osborne (Tatton): On paternity leave and the cost of the new regulations, the regulatory impact assessment produced by the Government clearly states that the cost to taxpayers will be £63 million recurring, the one-off cost to employers will be 10 million, and the cost to employers for covering absences will fall within the wide range of £25 million
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and £42 million. However, no assessment of the cost to larger employers is apparent. They would have to fund about 8 per cent. themselves, so has the Minister any figure for that?
Alan Johnson: I am not sure whether we have broken that down precisely. If the regulatory impact assessment does not address that, I will try to answer the hon. Gentleman's question later today.
Mr. Charles Hendry (Wealden): The Minister referred to the 92 per cent. recoverability rate. My recollection is that when that was introduced by the Conservative Government, it was accompanied by a reduction in employers' national insurance contributions to compensate for the fact that they would not get as much money back. If the principle is to be extended to statutory paternity pay, is it not appropriate to make a similar reduction to national insurance contributions?
Alan Johnson: We have moved into Finance Bill territory. Employers have welcomed reductions made to national insurance contributions since 1997. We have not heard a case for reducing national insurance contributions as a result of the introduction of statutory paternity leave and adoption leave. Adoption leave will affect around 200 people a year. On paternity leave, we expect an 80 per cent. take-up, but that may not be the case. I do not accept the hon. Gentleman's argument to marry up two different ideas, even if that was done under a Conservative Government, which the hon. Member for Wealden (Mr. Hendry) does not seem sure about.