National Insurance (Contributions) Bill

Shabana Mahmood Excerpts

Tuesday 10th December 2013 Commons Chamber

[Mr Gauke]

The exemption is available up to, but not including, the month in which the employee turns 21. I hope that that makes the matter clear to my hon. Friend.

Returning to the Opposition’s amendment, I see little point in the Treasury publishing a review of the level of youth unemployment. The Office for National Statistics is responsible for publishing statistics on employment, and those regular releases are available to the public through the ONS website. There is a limited case for the Treasury intervening and also publishing a review.

In addition, I do not think that there is much value in attempting to estimate the impact of a policy being introduced on a theoretical date. We announced in the autumn statement that employer NICs would be abolished for those under 21 years of age from April 2015. I can understand why the hon. Lady raises the question, but attempting to deliver that a year earlier, in 2014, would increase the administrative costs to business, and rushing the measure through in that way would be likely to lead to cost confusion and the failure of many employers to take it up. Such a tight time frame would not give employers, payroll software developers and Her Majesty’s Revenue and Customs enough time to update their IT systems. It would also not give HMRC enough time to ensure that the policy could be implemented in a way that did not disrupt its other important IT systems. Given that the policy cannot be delivered in April 2014, it would not be a good use of Government time and resources to attempt to estimate the impact of something that we do not intend to do and that cannot be delivered.

I dare say that I shall return to this matter later, but in the light of those comments, I hope that the hon. Lady will not press her amendment to a vote. I also hope that the new clause will be able to stand part of the Bill. It is an excellent measure that will help many of our constituents by increasing employment.

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

I wish to speak to amendment (a) to new clause 3. I welcome the Minister’s explanation of the thinking behind the new clause and his clarification of how the age limit will be interpreted. His clarification of the measure’s impact on pensions was also helpful, given that we did not have these proposals before us when the Committee considered the Bill.

In general, the Government’s new proposal, announced in the autumn statement last week, will hopefully encourage employers to take on more young people under the age of 21. With youth unemployment so high—it is nearly 1 million—and long-term youth unemployment a real concern, some action is welcome but, as the Minister has anticipated and as our amendment suggests, we have some concerns about how the Government are going about dealing with the issue.

I will deal first with some practical points relating to new clause 3 before moving on to our more substantive concerns about the Government’s approach. I have briefly discussed the impact of the measures with various stakeholders who have been scrutinising the new clause since the Government tabled it. Given that we were unable to scrutinise it in Committee, because of when it was tabled, it would be helpful if the Minister at least gave the House the benefit of his thoughts on the issues I am about to raise. Members of the other place can then take forward some of our concerns if there is more in them.

What impact does the Minister think the new measure will have on young people who are employed part time? As he will know, we have seen a huge rise in part-time employment and insecure employment, for example through the growth of zero-hours contracts, something the House has debated a great deal in this Parliament. My understanding is that many young people who work part time will not be caught by the measure because they earn far beneath the primary threshold. What consideration has he given to the impact on young people who are employed part time, given that for so many of them their first job is part time? As many Members will know, it is now not unusual for young people on the Work programme to be offered only part-time employment of zero-hours contracts, so it would be helpful if he explained the Government’s thinking on that.

I would also welcome the Minister’s view on how the measure might interact with the willingness of employers to take on graduates and the impact it might have on graduate employment. That is not about passing a value judgment on whether someone is taken on when they are 18 or whether employers decide to employ a graduate, but the Minister knows that the other announcements made in the autumn statement in relation to young people were about an increase in student numbers of 30,000 and a removal of student number controls to enable universities to take on as many students as they like. The number of 18-year-olds, in particular, participating in higher education is likely to increase.

It would therefore be helpful if the Minister outlined the Government’s thinking on how those two changes will interact and how they will ensure that they work in a complementary way, rather than skewing one type of recruitment practice ahead of another. Those issues are worthy of much greater deliberation than we will have the opportunity for today, so we might need to return to them, depending on what happens as the Bill makes progress.

I have two other points to make on the practicalities of new clause 3. First, we need to ensure that it is promoted properly to employers, particularly micro-businesses and even one-man bands, which might be encouraged to take on a young person, perhaps a family member. How will we ensure that they know exactly how that will operate and how it will interact with the employment allowance? That is important to ensure that micro-businesses, in particular, are well aware of how the two things align and that there is no confusion that could lead to a decrease in take-up. Secondly, my understanding is that no new funding has been announced to pay for the proposal, so it would be helpful if the Minister set out where the money will come from and how the costs are expected to increase, and not only in the first or second years, but in future years.

There are two main points of difference between the Opposition and the Government in relation to the new proposal. First, it is not bold enough. The Minister will know, because we have discussed it before, about the scale of the challenge we face and what the Government could and should have done to tackle the scourge of youth unemployment.

[Jenny Chapman (Darlington) (Lab)]

Welcome though the measure surely is, does my hon. Friend not feel, as I do, that with almost 1 million young people unemployed, it might be too little, too late?

[Shabana Mahmood]

I am grateful to my hon. Friend for her intervention and agree with her entirely. I was going to move on to that point. We disagree with the Government’s approach because we do not think that the proposal is bold enough, but we are also concerned about the timing—I will return to this later—because it has a direct impact on our proposed amendment to the new clause.

Youth unemployment is nearly 1 million—around 940,000 young people are unemployed—and the most recent figures, published in November, show that long-term youth unemployment has increased. Given the scale of the problem and the impact that every single day of unemployment has on a young person’s overall life chances, I believe that the Government should have come back with a much bolder offer in the autumn statement. It was a missed opportunity to go further and faster.

The Minister will not be surprised to hear that I think the Government should have adopted our alternative proposal for a compulsory jobs guarantee for every young person under the age of 25 who is out of work, funded by a tax on bank bonuses. [Interruption.] It has been spent only once—Government Members should look at the detail. The young person would have to take up the job or risk losing their benefits.

[Sheila Gilmore]

I am sure that my hon. Friend will agree that the idea of a jobs guarantee has been proposed not only by the Labour party; it was also a recommendation of the Government’s recent social mobility commission, which criticised the impact of the Youth Contract and suggested that a jobs guarantee would be a much better approach.

[Shabana Mahmood]

My hon. Friend is absolutely right. The Government’s Youth Contract has been branded a failure by their own advisers. It is also worth noting that the Work programme is finding work for only one in six long-term unemployed people. The House heard earlier, when the Secretary of State for Work and Pensions was called to answer an urgent question, about the other difficulties with the Work programme.

The scale of the problem we face in relation to youth unemployment is stark. I speak as the Member who represents the constituency with the highest rate of unemployment in the country. I meet many young people every day in my constituency who are themselves the children of people who found themselves unemployed in the last great recession in the 1980s. They are having the same problems that their parents’ generation had. Every day that a young person tries hard but fails to get a job increases their desperation and depression. I recently held a youth jobs fair in my constituency, along with my right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne) and my hon. Friend the Member for Birmingham, Erdington (Jack Dromey). More than 2,000 young people attended, and every one of them spoke of their desperation and their desire to find work and the difficulties of finding work in the current climate.

In those circumstances, knowing how much of a knock a young person’s life chances take when they find themselves unemployed for a long period, I think that it is right for the Government to consider taking much bolder action. The fact that they have failed to do so shows that they have failed to meet the scale of the challenge of our times. I fear that we are storing up a much bigger problem for the future.

In the absence of such action, my point to the Minister is that we hope the new clause will stimulate more employment for young people and encourage employers to consider taking on a young person, and that it therefore helps to get to grips with some of the problems. It is a good proposal. It does not go as far as we would like and perhaps it will not have the impact that a compulsory jobs guarantee would have, but on its own terms it is a good proposal, so why not do it now? Nothing the Minister mentioned seemed to be an insurmountable problem. He said that the IT situation would be a little difficult, but we should not let IT difficulties at HMRC stop us getting to grips with the scourge of youth unemployment. He has failed to introduce the employment allowance as soon as we believe it should have been introduced. He also decided not to scrap the regional national insurance employers holiday, so letting it run for three years, yet he knows that it fell far short of the targets that were set for it at the beginning.

The Minister said that the problem with the April 2014 date is that the Government wanted to wait until real-time information was all online and working properly. However, I have interrogated others on this point, and it was apparently not impossible or too difficult for the Government to amend the IT situation so as to enable the employment allowance to be brought in earlier than April next year. I am afraid that the same point applies to the proposal on national insurance for under-21s. The Minister has said nothing that suggests that it should not be brought in as early as possible, April 2014 being the best date on offer.

[Richard Fuller (Bedford) (Con)]

If I heard the hon. Lady correctly, she said that she wanted the cut in the jobs tax to be brought in sooner, yet in 2010 she said in Committee that she was proud to stand on a record of increasing the jobs tax. Does that represent a flip-flop?

[Shabana Mahmood]

It does not represent a flip-flop, as the hon. Gentleman well knows. It would not be a debate on this issue if he did not make the point that he has made on a number of occasions. I would have felt as though I had missed out on something if he had not made that intervention, so I am grateful to him. He will not be surprised if I repeat my previous answers to him in relation to national insurance. I was very proud to stand for election on the Labour party manifesto at the 2010 general election and proud that the Labour Government had got the recovery under way at the time of that election—a recovery that was choked off by this Government as soon as they came into power. [Interruption.] Government Members might not like to hear it, but I am afraid that that does not stop it being true.

Let me clarify my point about the employment allowance. From the moment it was announced in the Budget, our immediate critique was not that it should not be introduced —we supported its introduction from the beginning—but to say, as we have continued to say, “Bring it in as soon as possible—why wait?” If there were compelling reasons for the wait, it would be understandable, but I am afraid that I find nothing compelling in anything the Minister has ever said about the delay in bringing these proposals forward. All the issues relating to IT and systems and getting software up and running could be sorted out, with a bit of will.

I understand that software developers are still waiting on HMRC to give them the full guidelines on what software they will need to produce to make sure that take-up of the employment allowance goes ahead with relative ease. I hope that the Minister has had sight of the submission by Mr Holloway of the Learn Centre to the National Insurance Contributions Bill Committee, which was submitted after the Committee had disbanded but was still made available to all its members, because it contains concerns about the delay in getting proper clarification and explanation to software developers on what they need to do in relation to the employment allowance. Given that it is December and they have to get ready for the employment allowance to come online in April 2014, they will not have a huge amount of time to get everything in place and ready. If that is the position on the employment allowance, then why not add in the proposal on NICs for under-21s and deal with both issues at the same time?

Given that we are speaking from the Opposition Benches—unfortunately—our amendment does not propose that the measure should be introduced immediately in 2014; otherwise Government Members would no doubt have shouted at us about the cost of doing so and the spending commitment entailed. However, we have asked for a review that would look at the level of youth unemployment now and the impact that introducing the measure in April 2014 would have had on the level of youth unemployment as it stands today. That is because the Government should not escape scrutiny for the impact that this measure may have had compared with what it will have, I hope, when it comes into force in 2015. If it is found that the measure would have had a significant impact, as we believe it would, that is an important bit of information and the Government would be put under pressure to introduce it sooner than they intended.

This Government found money in the autumn statement for the married couples allowance. They have always said that the recognition of marriage in the tax system is symbolic. However, government is about choices and priorities, and if money can be found immediately to do something that is symbolic and sends a message, then surely it should be found for a practical Government measure that helps to prioritise our young people who need jobs today and not on a date far from now. The choices and priorities of this Government are wrong and they should think again. The emergency presented to this country by the current rate of youth unemployment cannot wait to be dealt with on some future date. The Government should reconsider the start date of this proposal. We therefore intend to press our amendment to a vote.

[Mr Brooks Newmark (Braintree) (Con)]

I am someone who looks at a glass of milk as being half full, not half empty, and I think that the Government have done much to help young people back into work. The hon. Member for Birmingham, Ladywood (Shabana Mahmood) may wish to mock the Youth Contract, but it has encouraged businesses to offer over 21,000 jobs to people at risk of long-term unemployment. Those 21,000 people appreciate the youth contract and want the job that it has enabled them to have.

We have over 1 million young people in apprenticeships, which are also getting young people back on to the jobs ladder. Indeed, the latest Office for National Statistics labour statistics indicate a significant rise—of about 50,000 in the past three months alone—in the number of young people in work. The number of young people seeking jobseeker’s allowance has fallen by 13,000—the 17th consecutive monthly fall. That is good news indeed. Many constituencies, of Members throughout the House, have benefited, as has Braintree, which has seen a fall in long-term unemployment, regular unemployment and youth unemployment.

On top of all that, I was absolutely delighted to hear the Chancellor supporting the Million Jobs campaign manifesto, which, I hasten to add, I helped to draft, by abolishing the jobs tax for under-21s. It is extremely important that if we are cutting taxes we do it to help those in society we really want to help. As a father of five children between the ages of 16 and 25, I am extremely sensitive to that age group. It is important that we get young people into work, and the new Government initiative does just that. It will enable even more young people to get a foothold on the employment ladder by providing a highly attractive incentive for businesses to hire a young person under 21. I thank Lottie Dexter, the director of the Million Jobs campaign, who has worked extremely hard not only in running it but ensuring that the draft manifesto that we put out only six weeks ago caught the Chancellor’s attention so much that he decided to support it in his autumn statement. I am delighted to support the new clause.

--- Later in debate ---

[Mr Gauke]

New clause 4 is needed as it addresses a tax issue arising under existing partnership tax rules where the immediate entitlement to partnership profits is restricted by the alternative investment fund managers directive—AIFMD. HMRC received further information about this during the partnerships review consultation. Following their discussions with the funds sector representatives and the Financial Conduct Authority with responsibility for the AIFMD implementation in the United Kingdom, the Government intend to put in place a statutory mechanism to address the issue, subject to parliamentary approval.

It is important to note that the vast majority of fund managers would not be affected; only those who operate through a partnership would be affected. Under existing partnership tax rules, tax is charged on profits as they are earned, rather than when they are received. An unfunded tax charge can therefore arise on profits that are allocated to an individual partner of an AIFM partnership and which are then deferred in line with the regulatory requirements of the AIFMD. That is because the partner cannot access the deferred profits in the year when they arise.

The new mechanism that the Government propose is designed in such a way as to meet the Government objective of a partnership review to achieve fairer taxation by stopping tax-motivated allocation of profits in mixed membership partnerships that typically include individual and corporate members. The new power introduced under new clause 4 will support the introduction of the mechanism and will be used to change the relevant national insurance contributions legislation by regulation, once the related Finance Bill 2014 legislation becomes law. It will also allow NICs legislation to be amended in future to reflect any subsequent changes to income tax legislation in that area, to maintain symmetry between tax and NICs positions.

New clause 5 and amendment 2 replace clause 13, which would have removed limits on the Treasury categorising members of limited liability partnerships who satisfy certain conditions as employed earners for the purposes of NICs, rather than self-employed earners. New clause 2 provides an express power to treat LLP members who meet certain conditions as employed earners for NICs purposes. Those conditions will be set out in regulations and will follow income tax legislation introduced in the Finance Bill 2014. Broadly, it will mean that the individual member of the LLP has no or little real economic interest or risk in the LLP, and instead will be rewarded by a fixed salary. Those conditions will be based on proposals on which HMRC has consulted, as part of the public consultation on changes to partnership tax and NICs rules. HMRC has been advised that in response to those proposals, structures with only corporate members were being promoted as a way around the proposed legislation. The schemes involved the individual establishing a personal service company or other intermediary, with that intermediary becoming a member of the LLP in place of the individual in order to avoid those provisions.

New clause 5 provides power to make regulations to achieve the policy objective of the measure, and counteract the artificial imposition of a company or intermediary to avoid the impact of the measure. Regulations will follow new income tax legislation in the Finance Bill 2014. That power will enable the reclassification by regulation of certain LLP members as employed earners for NICs purposes, even when they hide behind a company or intermediary.

The treatment of members of LLPs as self-employed was designed to replicate the position of traditional partnerships. The new clause will ensure that those tax rules are not used to create a tax advantage, and it creates a level playing field between partnerships that have not sought to misuse tax rules for LLPs and those that have done so. I appreciate that that was a rather technical explanation for rather technical new clauses, but I hope it was of use and that the House will agree that new clauses 4 and 5 be added to the Bill, instead of clauses 12 and 13.

[Shabana Mahmood]

I am grateful to the Minister for that helpful explanation of new clauses 4 and 5, and particularly the technical points and why the Government are no longer proceeding with clauses 12 and 13. I had some concerns in Committee about the impact of clause 13 in disapplying section 4(4) of the Social Security Contributions and Benefits Act 1992. That seemed to be possibly going too far and was ripe for lawyers to have fun with—I was one in my former life. I note that the Government have got rid of that problem and clarified their intention for LLPs by tabling new clause 5.

New clauses 4 and 5 both state that the Government can bring forward regulations to deal with their more technical aspects. Will there be an opportunity for consultation on those draft statutory instruments when they are ready, so we can ensure that no further issues arise as the Government try to implement the objectives that new clauses 4 and 5 are trying to achieve?

[Mr Gauke]

I thank the hon. Lady for her support for these measures. Detailed proposals in the form of draft regulations will be published early in the new year, and they will tie in with measures in next year’s Finance Bill. There will therefore be plenty of opportunity to consult on those regulations, and I look forward to debating with her measures on partnerships in next year’s Finance Bill. In that sense, I assure the hon. Lady that the measures will receive an appropriate amount of scrutiny, and I hope that the new clauses will stand part of the Bill.

Question put and agreed to.

New clause 4 accordingly read a Second time, and added to the Bill.

New Clause 5

Limited liability partnerships

‘(1) SSCBA 1992 is amended as follows.

(2) After section 4A insert—

“4AA Limited liability partnerships

(1) The Treasury may, for the purposes of this Act, by regulations—

(a) provide that, in prescribed circumstances—

(i) a person (“E”) is to be treated as employed in employed earner’s employment by a limited liability partnership (including where E is a member of the partnership), and

(ii) the limited liability partnership is to be treated as the secondary contributor in relation to any payment of earnings to or for the benefit of E as the employed earner;

(b) prescribe how earnings in respect of E’s employed earner employment with the limited liability partnership are to be determined (including what constitutes such earnings);

(c) provide that such earnings are to be treated as being paid to or for the benefit of E at prescribed times.

(2) Regulations under subsection (1) may modify the definition of “employee” or “employer” in section 163, 171, 171ZJ or 171ZS below as the Treasury consider appropriate to take account of any provision falling within subsection (1)(a) to (c).

(3) If—

(a) a provision of the Income Tax Acts relating to limited liability partnerships or members of limited liability partnerships is passed or made, and

(b) in consequence, the Treasury consider it appropriate for provision to be made for the purpose of assimilating to any extent the law relating to income tax and the law relating to contributions under this Part,

the Treasury may by regulations make that provision.

(4) The provision that may be made under subsection (3) includes provision modifying any provision made by or under this Act.

(5) Regulations under this section are to be made with the concurrence of the Secretary of State.

(6) Section 4(4) of the Limited Liability Partnerships Act 2000 does not limit the provision that may be made by regulations under this section.”

(3) In section 4B (power to make retrospective provision in consequence of retrospective tax legislation), in subsection (3), after paragraph (c) insert—

“(d) section 4AA (power to make provision in relation to limited liability partnerships)”.

(4) In section 10 (Class 1A contributions: benefits in kind etc), at the end, insert—

“(11) The Treasury may by regulations modify the law relating to Class 1A contributions in the case of an employed earner’s employment which is treated as existing by virtue of regulations under section 4AA.”

(5) SSCB(NI)A 1992 is amended as follows.

(6) After section 4A insert—

“4AA Limited liability partnerships

(1) The Treasury may, for the purposes of this Act, by regulations—

(a) provide that, in prescribed circumstances—

(i) a person (“E”) is to be treated as employed in employed earner’s employment by a limited liability partnership (including where E is a member of the partnership), and

(ii) the limited liability partnership is to be treated as the secondary contributor in relation to any payment of earnings to or for the benefit of E as the employed earner;

(b) prescribe how earnings in respect of E’s employed earner employment with the limited liability partnership are to be determined (including what constitutes such earnings);

(c) provide that such earnings are to be treated as being paid to or for the benefit of E at prescribed times.

(2) Regulations under subsection (1) may modify the definition of “employee” or “employer” in section 159, 167, 167ZJ or 167ZS below as the Treasury consider appropriate to take account of any provision falling within subsection (1)(a) to (c).

(3) If—

(a) a provision of the Income Tax Acts relating to limited liability partnerships or members of limited liability partnerships is passed or made, and

(b) in consequence, the Treasury consider it appropriate for provision to be made for the purpose of assimilating to any extent the law relating to income tax and the law relating to contributions under this Part,

the Treasury may by regulations make that provision.

(4) The provision that may be made under subsection (3) includes provision modifying any provision made by or under this Act.

(5) Regulations under this section are to be made with the concurrence of the Department.

(6) Section 4(4) of the Limited Liability Partnerships Act 2000 does not limit the provision that may be made by regulations under this section.”

(7) In section 4B (power to make retrospective provision in consequence of retrospective tax legislation), in subsection (3), after paragraph (c) insert—

“(d) section 4AA (power to make provision in relation to limited liability partnerships)”.

(8) In section 10 (Class 1A contributions: benefits in kind etc), at the end, insert—

“(11) The Treasury may by regulations modify the law relating to Class 1A contributions in the case of an employed earner’s employment which is treated as existing by virtue of regulations under section 4AA.”’.—(Mr Gauke.)

Brought up, read the First and Second time, and added to the Bill.



New Clause 1

Post implementation review

‘(1) Her Majesty’s Revenue and Customs must, after one year, prepare a post implementation review of the employment allowance which the Minister shall lay before Parliament.

(2) The review must consider—

(a) what impact the employment allowance has had on the number of jobs;

(b) what impact the employment allowance has had on wage levels;

(c) overall take-up of the employment allowance;

(d) the geographical spread of businesses, charities and sports clubs taking up the employment allowance; and

(e) the effectiveness of Her Majesty’s Revenue and Customs’ strategy to promote the employment allowance.’.—(Shabana Mahmood.)

Brought up, and read the First time.

[Shabana Mahmood]

I beg to move, That the clause be read a Second time.

[Mr Speaker]

With this it will be convenient to discuss

New clause 2—Administrative and compliance costs review

‘(1) Her Majesty’s Revenue and Customs must, after six months of the Act coming into force, prepare a review which the Minister shall lay before Parliament.

(2) The review must consider—

(a) whether there are any administrative or compliance costs associated with the employment allowance being reported by those applying for it; and

(b) whether businesses, charities and sports clubs are having any problems in claiming the employment allowance.’.

[Shabana Mahmood]

Given that I am still relatively new to my shadow Treasury brief, I am not yet—as hon. Members who served in Committee will no doubt be pleased to note—suffering from review fatigue. Both of the new clauses seek further reviews from the Government. New clause 1 envisages a post-implementation review, which was the subject of some debate in Committee, and I felt it was worth having a further discussion to push the Government a little more in relation to the impact that the employment allowance will have on jobs and wage rates, and the effectiveness of the promotion of the employment allowance to all those who are eligible for it.

New clause 2 envisages an administrative and compliance cost review—a one-off review to take place six months after the employment allowance comes into force. It was prompted by the evidence of Mr Holloway, which I mentioned earlier, and I shall go into more detail shortly.

In Committee, the Minister helpfully indicated that he would publish information on two of the elements that I have included in new clause 1—the overall take-up of the employment allowance and its geographical spread. I understand from his comments in Committee that the information on the geographical location of those taking up the employment allowance will probably be available on a regional basis. I hope that he will clarify that point when he responds to the debate. The Minister said that he would put information on both elements in the Library so that Members can raise questions about the effectiveness of the employment allowance and its take-up levels. We have in mind the previous regional national insurance employers’ holiday, which had difficulties from the start. We have made the point that those difficulties should have been dealt with sooner, and it is in that context that we think the Government should have a formal post-implementation review of the take-up of the employment allowance.

[Richard Fuller]

The hon. Lady earlier made the breathtaking assertion that although the Labour party was proudly in favour of increasing the jobs tax in 2010, its attempt now to reduce it was not a flip-flop. With the proposal of an annual review, businesses will be concerned that the Labour party is not committed to the employment allowance, as we are. The hon. Lady said in Committee that she could not commit the Labour party to supporting the employment allowance at the next election, so will she therefore admit that Labour’s support for employment allowance is at risk in their shuffle of policies before that election?

[Shabana Mahmood]

I will repeat exactly what I said to the hon. Gentleman when we had this debate in Committee: we have been unequivocal in our support for employment allowance since it was introduced in the Budget earlier this year. We have taken every opportunity to say to the Minister and his colleagues in the Treasury team that it should be introduced sooner. We could not have been more unequivocal in our support.

The purpose of the review is not to put the employment allowance at risk. The regional national insurance employers’ holiday scheme had problems with take-up from the start. They were raised with Ministers in this House at every available opportunity—in oral and written questions—yet we had to wait for the full three years of the scheme to run before the Government brought forward a proposal without the same problems. That is the context for tabling new clause 1. We want employment allowance to succeed and not suffer from low take-up—we want it to be taken up. The Government say that it will be taken up by 90% of eligible employers. I am sure that all Members want to see 100% take-up, and there seems to be no real reason why 10% should be missed off. We want to ensure that take-up is not affected by any unforeseen issues during roll-out.

[Ian Swales]

Does the hon. Lady accept that she can comment on the previous scheme precisely because the Government keep all such schemes under review? Neither scheme needs a review to be in the Bill.

[Shabana Mahmood]

It would be helpful for the review to be in the Bill, as it would concentrate the Government’s mind in ensuring that it works. We had to wait the full three years for the previous scheme to finish before we had a change of course towards something that will not suffer the same problems. Both points are good reasons to include a review in the Bill.

In Committee, the Minister remarked on take-up and geographical location. I am sure all Members want the scheme to be taken up nationally, and for it not to be skewed by region because promotion is not good enough in some parts of the country and employers do not find out about it. We had a good debate on whether the review should consider the impact on the overall number of jobs and wage levels. I included both in the new clause because they are worth considering.

The Minister and other members of the Committee said that they hoped the £2,000 made available to employers through employment allowance will be passed on to employees, either by increasing wages or taking on more employees. There was also the hope that employers would be encouraged to reinvest that money in the business, in research or innovative practices to help productivity. It is worth trying to measure the impact of employment allowance on job levels and wage levels. I take on board the point made in Committee by the Minister, and by members of the Committee on both sides of the House, that the decision to either increase wages or take on new workers is, for any business owner, based on a number of factors, and that employment allowance may be one of them. The policy is not being introduced in a vacuum. There is a clear intent and desire for it to stimulate employment and, hopefully, an increase in wages.

It seems sensible at least to consider the relationship between the employment allowance and job and wage levels. The new clause does not envisage a methodology, but I remind the Minister and hon. Members that when the Bill was introduced, the Federation of Small Businesses carried out a survey asking its members what they expected to do with the £2,000 allowance, and many said that they would increase job or wage levels or reinvest in their business. Employer surveys and other stakeholder engagement methods would be useful means of interrogating the impact of the employment allowance on job and wage levels. It is worth putting that in the Bill.

[Ian Swales]

The hon. Lady makes an interesting argument, but who would be responsible for carrying out such a survey? Would the FSB, for example, be the best people to carry it out or does she envisage some kind of Government process?

[Shabana Mahmood]

In evidence to the Committee, the FSB said it would survey its members again anyway. The Government could look at that survey and work with the FSB to see how it surveys its members. They might want to take a representative cohort of people who have taken up the employment allowance; discuss with them its impact on their businesses; and then extrapolate lessons for national take-up. I do not seek to prescribe exactly how they should carry out the review—I am sure there are clever bods in the Treasury whose job it is to think of these things—but given what has happened already in this Parliament on national insurance, it is important that we concentrate the mind of the Government. The House expects and wants this policy to succeed and not to suffer the problems of the previous policy. It also wishes to continue pressing the Government on this point.

The last element of new clause 1 concerns the effective promotion of the employment allowance to all who are eligible. In particular, I have in mind the FSB’s evidence to the Committee about the effectiveness of that communication. It is worth considering that in a review, particularly if there is a problem, such as a geographical inequality, with overall levels of take-up. How the allowance is promoted will clearly have an effect. Charities and sports clubs are rightly eligible for this £2,000 reduction in their national insurance bill, but there is a risk that they might miss out and that we promote the allowance to businesses more effectively just because they have more stakeholders and larger bodies getting the message out. The new clause seeks to ensure that we keep across that concern and that not only eligible businesses but other groups that rightly fall within its scope take up the employment allowance.

New clause 2 seeks a short administrative and compliance costs review six months after the Bill comes into force. It is motivated by two things in particular. First, as I mentioned earlier, the Government expect 90% of those eligible to claim the employment allowance. The Institute for Fiscal Studies and others—we heard this in the Committee evidence session—have asked about the other 10%. The system for claiming the employment allowance is straightforward and everybody expects the running of it to be smooth. However, one wonders why 10 per cent. are always assumed to miss out.

--- Later in debate ---

[Mr Gauke]

Let me return to my earlier remarks and the commitment I made in Committee, which I have repeated this afternoon, that we will publish take-up numbers twice-yearly. That information will be provided on a regional basis, which I hope reassures the hon. Gentleman that he will be able to monitor take-up in Northern Ireland.

The other point I would make—again, it is a point I made in Committee and on Second Reading—is that there are a number of distinctions between the employment allowance and the NICs holiday that we had in place earlier in this Parliament and, indeed, the Opposition’s proposals for a NICs holiday. What we are proposing is a much easier policy for employers to implement; in fact, it is largely automatic. Those with an up-to-date payroll—that essentially applies to nearly every employer—will find that the employment allowance is automatically applied. Those employers essentially just need to click on a box and then it should work.

Given those reassurances and in the light of my existing agreement to make information about take-up available twice yearly, I hope that the hon. Member for Birmingham, Ladywood will withdraw her new clause.

Let me deal with the hon. Lady’s new clause 2, which seeks to require HMRC

“after six months of the Act coming into force”

to “prepare a review” to be published in Parliament. Such a review should consider

“whether there are any administrative or compliance costs”

reported by employers claiming the employment allowance, and

“whether businesses, charities and sports clubs are having any problems in claiming the…allowance.”

The new clause is unnecessary for two reasons. As I have pointed out, the tax information impact note already commits the Government to keep the scheme under review through the communication of stakeholders affected by the measure. As part of this review, HMRC will speak to interested parties to gauge their view of the employment allowance and to ascertain the ways it has been used.

As I said, HMRC talked over the summer to various interested parties, including software developers, charities and small and medium-sized businesses, about the design and operation of the allowance, including the claims process. There are continuing discussions between HMRC and these groups around the guidance and publicity, and they will continue after the launch of the employment allowance next April. These contacts between HMRC and relevant representative groups will provide the basis for a continuous review of the way in which the allowance is working. I acknowledged in Committee that hon. Members will relay any concerns or thoughts about the allowance on behalf of employers in their own constituency. Hon. Members will also recall the commitment I gave in Committee to publish the information twice yearly, as I mentioned. That in itself will provide an indication of the ease with which employers are able to claim the benefit of this relief.

As I pointed out earlier this afternoon, the employment allowance will be very easy to claim. Employers will receive it through the routine operation of PAYE—pay as you earn. Employers will simply need to confirm their eligibility by their regular payroll processes. Enabling the employment allowance to be claimed by employers through the payroll software will ensure that it is straightforward to claim. Employers simply have to indicate yes once in their EPS—employer payment summary—and the claim will continue from tax year to tax year.

After making the claim, employers will not need to pay their first £2,000 of secondary class 1 national insurance contributions if their liability is lower than £2,000 in the first month or quarter—depending on whether the employer pays his PAYE liabilities monthly or quarterly—and any unused allowance will be carried forward to the next month or quarter until it is exhausted. If an employer does not have an employer payment summary on their software, the free HMRC basic PAYE tools package can be used. For the small number—about 2,000—of eligible employers who still submit their returns to HMRC on paper, there will be a paper process to mirror the IT process.

With those reassurances, I hope that the hon. Lady will withdraw her new clause.

[Shabana Mahmood]

I am grateful to the Minister for his comments on my new clauses 1 and 2, particularly for the additional information he made available on the issues raised by new clause 2. Given his explanation, I am happy to withdraw the motion.

Clause, by leave, withdrawn.

Clause 12

Alternative Investment Fund Mangers

Amendment made: 1, line 2, leave out Clause 12.—(Mr Gauke.)

Clause 13

Members of Limited Liability Partnerships

Amendment made: 2, page 11, line 8, leave out Clause 13.—(Mr Gauke.)





Third Reading

--- Later in debate ---

[Shabana Mahmood]

First, may I join the Minister in paying tribute to all the members of our Bill Committee, who helped to scrutinise the Bill and provided valuable insight into its measures? If there was the occasional predictable question, it was always asked with good humour and good grace.

We have supported the employment allowance from the moment it was announced in the Chancellor’s last Budget. Our bone of contention with the Government has not been about the detail of the EA or who it applies to; rather, it has been about the time scales for its introduction. We believe that the Government should have changed course much earlier, particularly given what happened with the previous regional national insurance holiday scheme. Although that helped a lot of businesses, the number certainly fell far short of the 400,000 it was supposed to assist.

The Government say this Bill is about helping our country compete in the global race, but if we are going to compete in the global race, we will have to start getting out of the starting-blocks more quickly. I therefore say to the Minister that the Government should have acted more swiftly on national insurance. If the Government had changed course sooner, we may have been well into the take-up of the EA by now instead of having to wait for it finally to be introduced in April next year, and the country might already be enjoying all the good effects that all of us across the House hope will flow from it.

In last week’s autumn statement the Government introduced a new measure that we have also supported today: the abolition of employers’ NICs for all employees under 21 years of age. I repeat what I said to the Minister in our earlier debate, however: we would have liked bolder action from the Government in their autumn statement to help deal with the problems of youth unemployment. We do not think this measure, which will come into force only in 2015, goes far enough, nor will it stimulate higher levels of youth employment as quickly as we would like. The real bone of contention, which I fear we will continue to debate until this measure finally comes into force in 2015, is the delay. None of the reasons the Minister gave in his winding-up of the debate on new clause 3 for waiting until 2015 sounded sensible to me. He said that if the Government could have done so, they would, of course, have wanted to bring the measure forward in 2014. But the Government could also have got rid of the regional national insurance employers’ holiday scheme earlier when it was clearly failing, but they did not do so. I do not understand why it is impossible to introduce this measure earlier. I am sure we will examine that issue further when the Bill is debated in the other place and through oral and written parliamentary questions. The Minister and I will continue to debate the merits of the introduction of that measure in 2015, as opposed to the introduction of the new clause, which is what we would have liked.

We have supported the EA in the Bill and we consider that the extension of the GAAR to apply to national insurance contributions is sensible, although we continue to have very real concerns about the extent of the GAAR.

[Julian Smith (Skipton and Ripon) (Con)]

Does the hon. Lady wish to put on record in this Chamber that she regrets that Labour did not bring an anti-avoidance rule into law during its 13 years in government?

[Shabana Mahmood]

As the hon. Gentleman knows, we had exactly the same line of questioning in the Bill Committee and I remind him that the Labour Government brought in the disclosure of tax avoidance schemes, which has raised a hell of a lot more money than the Government believe the GAAR will. We have a proud and strong record on tax avoidance. Also, that does not get the Government off the hook in respect of their GAAR, which will not make quite the impact on the tax gap that everybody would like.

The measures relating to oil and gas workers and to limited liability partnerships have changed in order to clarify the Government’s intentions in the new clauses and the removal of old clauses 12 and 13, but they are both sensible measures that we are happy to support. So, although we have real concerns about the pace at which the Government are moving to deal with the challenges that this country faces—especially youth unemployment, which we are debating today as a result of the measure in the autumn statement—we support the measures themselves and will support the Bill’s Third Reading.