National Insurance Contributions Bill

My Lords, the House will be extremely grateful to the Minister for his introduction to this quite technical Bill, but I found interesting what he did not say. First, the Treasury in its current straitened circumstances needs all the revenue it can get. Secondly, until Royal Assent of the Finance (No. 2) Bill to which the Minister referred, what was going on was totally legal. It is one thing to stamp on such tax avoidance schemes at a particular time. I disagree with the conclusion of the committee to which the Minister referred, and which the Government accepted with alacrity, that retrospection is suitable in this particular case. As the Minister said, most of the Bill arises from a Government warning in a Written Ministerial Statement that both tax and national insurance contributions would be payable on non-pay remuneration of employees from 2 December 2004. As far as the tax position was concerned this was enacted in last year’s Finance (No. 2) Bill, which became law last July. It was to be retrospective, as promised, to the date of the Written Statement some six months earlier. In my book, retrospective legislation is bad legislation, whether of tax or national insurance. Unfortunately, even though your Lordships’ House conventionally rails against retrospective legislation and often votes it down, this House is barred by the Parliament Acts from amending finance Bills and could do nothing about it. None the less, the back-dating of tax on non-pay remuneration is now law and we have to accept that fact. I suppose the Government could claim that it is only for six months so they can get away with it—which they have. Today we have a totally different situation. We are not concerned with the tax position of employees, we are considering the national insurance charges of both employers and employees. The question arises whether the employer would have remunerated his employees so generously if he had been aware of the extra subvention he would have to pay. It is no good the Minister saying that he was warned. How many employers read Written Ministerial Statements? I suspect very few, unless they have a government relations department that scans Hansard for them. In any event, having been told by the latter or by their trade organisations, they might have felt that they had got away with not having to pay NICs. Is this Bill then due to an afterthought? Why has it taken so long to introduce it? Why could its contents not have been incorporated in Schedule 2 to the Finance (No. 2) Act last July, or would that imply the breaking of a golden rule of social security—that national insurance charges are not a tax? Could the Minister read from the updated brief why NICs are not a tax? I was sent a Written Answer at the end of the last Session that is revealing. I had asked Her Majesty’s Government whether the money saved by moving women’s retirement age from 60 to 65 would remain in the National Insurance Fund. The noble Lord, Lord McKenzie of Luton, himself answered that the Government would continue to make decisions on NICs and social security benefits funded from the National Insurance Fund in the Budget and Pre-Budget Report. In other words, the Chancellor is fully prepared to appropriate the money from the fund into general taxation rather than, as sometimes happens, the other way round. I shall have more to say about this when we debate the Turner report in a few weeks’ time. To return to the Bill proper, much of it is to do with the threat of retrospection—for a minimum of 18 months. Can the Minister give me any precedents for NICs being backdated as far as that? If not, he will surely suffer the condemnation of your Lordship’s committee on deregulation, which I hope will also comment on the word ““expedient””, which appears several times in the first two clauses. It would be helpful both to me and to the committee if the Minister said when it will and will not be expedient for national insurance charges to be backdated. Whether they should be at all, I shall leave as a matter for discussion in Committee.