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National Insurance Contributions Bill

Volume 726: debated on Monday 14 March 2011


Clause 3 : Increased product of additional rates to be paid into National Insurance Fund

Amendment 1

Moved by

1: Clause 3, page 2, line 5, leave out ““50”” and insert ““50, or such greater percentage as is necessary to ensure that the National Health Service allocation will grow in real terms year on year””

My Lords, we return to the issue of the NHS allocation from the National Insurance Fund. The specifics of the amendment require the percentage of the product of the additional primary percentage rate to be either 50 per cent or such greater percentage as would ensure that the allocation increases in real terms. In essence, the purpose of the amendment is to stop the NHS being short-changed. It is a variation on the theme of the amendments in the other place that required the NAO to report on what sums would be required for this to be achieved. When this was debated in the other place, the Minister offered two arguments against this approach. The first was that the spending on health is set by the spending review and is not affected by the NHS allocation. The second was that the Government would anyway normally expect contributions to the fund to rise broadly in line with earnings. The Minister, Mr Gauke, said:

“In any case, the amount allocated to the health service from national insurance contributions would, other factors being equal, be expected to grow in line with earnings and therefore grow in real terms every year under the terms of the Bill”.—[Official Report, Commons, 13/1/11; col. 475.]

If that is what the Minister’s colleagues believe, perhaps he will say what part that judgment played in the spending review allocation.

However, it would seem that the Minister’s colleague is mistaken. In Committee, the noble Lord, Lord Sassoon, helpfully pointed out Appendix 6 to the GAD report on the 2011 benefits uprating order, which shows the NHS allocation reducing in 2011-12 in comparison to the current year. This outcome is based on assumptions that the number of jobs in the economy would remain the same over the two years and that earnings are expected to increase by 2.1 per cent. This would suggest that, as regards Mr Gauke’s premise, the NHS allocation should rise by some £400 million and not fall. Overall, therefore, it seems that the NHS allocation for 2011-12 has been short-changed by £600 million. Why?

As was pointed out in Committee, in keeping the NHS allocation of the additional national insurance to just 1 per cent, the Government appear to have overlooked the changes to the various thresholds, which were policy changes designed to mitigate, in part, the effect of the national insurance increases. We have debated some of these during our consideration of this Bill. Will the Minister confirm that the effect of the reduction in the UEL from April 2011 and a significant increase in the primary threshold means that, for primary contributions, the band of earnings for 2011-12 on which the 2.05 per cent NHS allocation could be made is cut by something like £2,800 a year, although the 2 per cent rate, just 1 per cent of which is allocated, starts £1,350 earlier? Subject to further adjustments to the thresholds, that will mean a recurring diminution in the amount of the NHS allocation and an equal and opposite benefit to the fund.

Perhaps in dealing with the point, the Minister will say what the coalition Government’s policy objective is in respect of this allocation. Is it to maintain the allocation in real terms or to let it drift? How, if at all, is the projected allocation taken into account in determining the overall resources for the NHS?

We persist in these matters not just as a narrow question of arithmetic but because of our concern for the NHS and what is happening to it. We are concerned that the BMA reports a gap between government rhetoric about protecting front-line staff and the reality on the ground and that the recent comprehensive survey of healthcare cuts found that more than 50,000 doctors, nurses, midwives and other NHS staff are due to lose their jobs. I do not propose to cite at length the improvement brought about to the NHS under the previous Labour Government, but we note the coalition agreement’s pledge:

“We will guarantee that health spending increases in real terms in each year of the Parliament”.

However, in a devastating analysis in Committee in another place, my right honourable friend John Healey MP blew apart the Government’s claims that their plans represented a real-terms increase, particularly because of updated inflation forecasts and the allocation of funding from the NHS budget to cover social care budget shortfalls of local authorities. Of course, there are other pressures from the VAT increase, which the King’s Fund has estimated will cost the NHS some £300 million a year.

We know that the Government have not rebutted this analysis and that they are on course to break the coalition pledge of a real-terms increase in funding. Instead, they are heading for a real-terms cut. Despite the fact that the Prime Minister promised to protect NHS capital investment, that, too, is being cut by 17.4 per cent over four years. In the circumstances, it is surprising to say the least that the NHS allocation from the National Insurance Fund is not being maintained, at least in real terms. This is what the amendment seeks and I beg to move.

My Lords, Amendment 1 returns to the allocation of national insurance contributions receipts between the National Insurance Fund and funding of the NHS, which was covered both at Second Reading and in Committee. This amendment, as the noble Lord, Lord McKenzie of Luton, has explained, is aimed at ensuring that the NHS allocation of the additional rate is subject to an adjustment to ensure that the funding of the NHS from national insurance contributions will grow in real terms year on year. The amendment would require comparisons to be made from one year to the next of the NHS allocation and adjustments to ensure that the allocation grows in real terms each year.

As I explained in Committee, the amount that is to be spent on the NHS, whatever the noble Lord says, was confirmed in the spending review in October last year and is unaffected by whether the funds come from national insurance contributions or elsewhere. The noble Lord says that he wants to ensure, through the amendment, that the health service is not short-changed. I can absolutely assure noble Lords that nothing in this Bill goes anywhere near short-changing the National Health Service. The amendment would ensure that the national insurance allocation to the NHS increases year on year, which is a bookkeeping matter, but nothing more.

It may help noble Lords if I put this matter into a bit of context, because I was beginning to lose some of the train of the noble Lord’s argument and I fear that others may have done so as well. Perhaps it would be helpful to the House to go back and explain the numbers very broadly.

I shall take the last full year for which the numbers are certain. In 2009-10, the total sum raised by national insurance contributions was £94 billion. Of that, just over £20 billion was allocated to the NHS and the balance, around £74 billion, was allocated to the National Insurance Fund. Total NHS expenditure in 2009-10 in England alone was exactly £100 billion, so it is important to understand that, whatever allocation of funds out of NICs proceeds to the National Health Service, it makes up only around 20 per cent of NHS expenditure.

I have also been looking at the numbers over the past few years. If we go back to 2004-05, for example, in that year the contribution made by NICs to NHS expenditure on the basis that I have described was 24.3 per cent, but by 2009-10 that contribution had fallen to 20.3 per cent. So I find it quite hard to accept noble Lords opposite casting all sorts of aspersions at the present Government about how they will safeguard expenditure on the NHS when their own record shows that over the last few years they contributed a significantly falling percentage of NICs to NHS expenditure. Nobody challenged them with the thought that they would renege on their commitment to NHS expenditure, so I do not expect noble Lords seriously to challenge the fact that this Government will stick to their commitment to increase National Health Service expenditure in real terms. The point is that NICs will only ever make a small but significant—20 per cent or thereabouts at the moment—contribution to NHS expenditure. The balance—the greater sum out of NICs—will go where it has to go, which is into the National Insurance Fund.

I do not want to belabour the point but, in big-picture terms, the amendment would make absolutely no difference. It would not affect the money that goes into the National Health Service. The negative effect of the amendment would be to create a degree of uncertainty in establishing the NHS allocation, as we would know the receipts from national insurance for sure only after the end of the tax year, because they are dependent on wage levels, economic conditions and the thresholds as they apply in a particular year. We would then have to compare those with the previous year’s allocation and make an adjustment if necessary to ensure a real-terms increase. That would add administrative complexity and create accounting and funding uncertainty, not least for the Government Actuary, who is required to report on the state of the National Insurance Fund each year. It would have, as I have explained at some length, no impact on the overall spending on the NHS, which is a rightful concern of noble Lords.

Government policy is to maintain the level of national insurance contributions allocated to the NHS and to allocate additional revenues from rate rises to the National Insurance Fund. That is what the Bill will achieve. That helps to ensure that plans for payment of pensions and other contributory benefits are sustainable in the long term. In that way, we can protect pensioners with the new triple lock, which guarantees each and every year a rise in the basic state pension in line with earnings, prices or a 2.5 per cent increase, whichever is the greatest.

I repeat that this amendment will not affect overall spending on the NHS because that figure has been set in the October spending review. Given that the figure has been fixed, the amendment would serve only to create a degree of additional bureaucracy and complexity. I have gone to some length to reassure, I hope, the noble Lord, Lord McKenzie of Luton, that the health service will in no way be short-changed because of the Bill. Therefore, I ask the noble Lord to withdraw the amendment.

My Lords, I thank the Minister for his response. He said that he did not believe that we could reasonably challenge the assertion that the coalition Government would increase funding for the NHS in real terms, but that is precisely what we are doing. If the noble Lord looks at the Red Book and the projections, the aggregate figure is a 0.4 per cent increase, but when you back out the fact that included in that is £1 billion reallocated for social care, because local authority budgets have been squeezed, you will see the opposite effect—a real-terms cut. That was part of the backdrop to the amendment.

The noble Lord said that the Government’s proposition was to “maintain” the allocation, but that is precisely what they are not doing this year. I raise what Mr Gauke said in the other place. He said on the record that, because earnings were increasing and were projected to increase next year, on the basis of the Government Actuary’s report, he would expect the NHS allocation to increase.

At the end of the day, the Government are clearly under pressure on spending, as any Government would be at the current time. If they are looking for resources outside of the National Insurance Fund to make good any shortfall in meeting their commitments, that will be more difficult if they cannot get a reasonable allocation from the National Insurance Fund—a reasonable allocation being an increase in real terms when earnings are increasing as well. That was exactly the premise of Mr Gauke in another place.

The Minister made much of what this would mean in terms of administration, but I reject that rather bureaucratic proposition of how you could deal with this, because I think that it could be dealt with quite easily on the basis of estimates, with adjustments at the end of the year. There is no great mystery about that. Having said that, our real concern is the fundamental issue of whether proper funding is going to the NHS and whether in real terms the Government are meeting their commitment. We do not believe that they are. This is just one facet of that. However, I think that we have probably got as far as we can on this. I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

Clause 4 : Holiday for new businesses

Amendment 2

Moved by

2: Clause 4, page 2, line 8, at end insert—

“( ) This section applies to all regions and countries of the United Kingdom.”

My Lords, in moving Amendment 2, I shall speak to the other amendments in the group, which seek to remove the excluded regions from the Bill so that the national insurance contributions holiday will apply without geographical restriction. It will bring London, the eastern region and the south-east within the benefits of the provisions.

There are two fundamental reasons why we continue to advance this proposition. The first is fairness and the second is to do with simplicity. To deal with the latter first, it was clear from probing that having excluded regions is a complicating factor in the construction of the legislation and the operation of the scheme, and would discourage a clear understanding and therefore take-up of the scheme. We identified complexities for some types of businesses as to where the new business was principally carried on and, I think, established that some of the 10 employees by whom the national insurance holiday could be enjoyed could anyway be working in the excluded regions. I think that we left unresolved the issue of how, if at all, the holiday would work whereby new business might contribute to the shared services of a group.

I am sure that the Minister accepts that having the excluded regions as part of the scheme creates additional bureaucracy and administrative cost, but the real issue is fairness. Excluding three regions from the holiday scheme means that significant parts of the UK that are every bit as deprived as other parts and have equal if not higher unemployment and a heavy reliance on public sector employment are denied this incentive. If the national insurance contribution holiday is a meaningful incentive, while we do not think that it is perhaps the most effective means of stimulating growth, we can see that it will help and believe that it should be fairly available. Help, of course, is needed especially at the current time, with the unemployment figures looking continually grim. The unemployment rate for the three months to December 2010 was up to 7.9 per cent, and the total number of unemployed people increased by 44,000. For 16 to 24 year-olds, unemployment increased by 66,000 to reach 965,000—the highest figure since comparable records began in 1992.

The Minister has to date been a little coy about providing up-to-date figures for the take-up of the scheme, which has now been running with effect from June last year. Figures given in another place suggest take-up by January this year of some 1,500 businesses, which is obviously disappointingly short of what might have been expected, as the overall projection is that 400,000 businesses will participate over the three years and two months that the scheme will operate. If the Government are not to fall woefully short of their target and to miss an opportunity to deploy to the full the resources allocated to stimulate the growth of jobs, the scheme requires better take-up or an expanded application. We offer by way of a later amendment the requirement for an annual report to take more formal stock of progress. That could lead to changes in the scheme if the report showed that including the currently excluded regions was leading to overspending. Modifications could then be made.

It is worth putting this in the context of the most recent labour market statistics, which showed in the quarter to September last year a net increase of 9,000 jobs, including 63,000 additional jobs. Clearly, those additional jobs will not all come from start-ups and some will come from the currently excluded regions, but that illustrates the headway in the current budgetary provision. The holiday was projected to cost the Exchequer £50 million this year. At £2,000 per business, which I think is the estimate, that should mean 25,000 businesses at least having taken up the scheme by 31 March. Can the Minister give us any assurance on this point? It is difficult for him to argue that removing the exclusion of regions would cause the budget allocation to be exceeded if he cannot assure us that the scheme is currently on track.

The Government have targeted the holiday by reference to the reliance on public sector employment, the idea being that the holiday will promote the formation of new businesses in the areas most reliant on public sector employment. Estimates of job cuts arising from government spending cuts vary, but 500,000 could be in the pipeline, together with consequential effects on the private sector job market. The VAT rise simply adds pain to that. By targeting areas of existing public sector employment, the national insurance holiday seems to be focusing on what is to come, not on what exists, although there may be a correlation between the two.

Whether the focus is on the reliance on public sector employment, existing unemployment levels or deprivation, significant anomalies occur by taking a broad regional analysis. Nearly half of constituencies that are the lowest 15 for claimant count unemployment are in regions that can benefit from the national insurance contribution holiday, and 20 per cent of constituencies in the highest 30 for claimant count unemployment are in regions that are denied the benefit of the holiday. We know that of the top 12 most deprived local authorities on the economic deprivation index, seven will miss out on the contribution holiday.

The House of Commons Library produced a report that sought to analyse public sector employment by constituency. While caveating the complete accuracy, it set out figures for the relative importance of public sector employment. Again, we find that 25 constituencies in the top 100 for reliance on public sector employment are in regions that cannot benefit from the holiday, and that 43 constituencies in the bottom 100 for such reliance are in regions that can benefit. The ONS public sector employment statistics bulletin for quarter 1 2010 not only shows a generally relatively narrow spread across the English regions but shows London to have a higher public sector employment rate than the West Midlands and the east Midlands. London, of course, is excluded.

Even assuming that the Government are correct in targeting just by reference to the reliance on the public sector—in the current climate of savage job cuts in the public sector, that is not unreasonable—their regional approach is missing too much of the target. Each region and country of the UK has pockets of deprivation, high unemployment and a high reliance on public sector employment, as well as areas of prosperity and high employment. To limit the holiday on a regional basis is too crude. The Government need either considerably to fine tune the approach, with the bureaucracy that that would entail, or to lift the excluded region prohibitions. This is what fairness demands. I beg to move.

My Lords, I have made clear in the past my criticism of the Government’s cuts to regional expenditure. Therefore, I welcome the fact that this measure potentially puts back the best part of £1 billion into regional development. It is not the traditional way in which it has been done. Arguably, if it works, it will be more effective because it follows the market absolutely rather than the views of regional development agencies. Therefore, it could be an effective way of getting money back where it is needed.

I found the first of the arguments of the noble Lord, Lord McKenzie, about fairness quite perplexing. To argue that the measure is unfair because it excludes the more affluent parts of the country is to argue that regional policy is unfair because it excluded or did not give much preference to the wealthier parts of the country. It is true that there are wards and constituencies in London that are extremely poor and that have high levels of unemployment—that has been the case for a very long time and throughout the history of regional development—but it has not been seen in the past as a reason for not giving additional support to the north, where the problems are even greater. The difference between the problems of Newham and those of Sunderland, Liverpool and Barrow is that Newham is in a buoyant labour market within a travel-to-work area that is doing very well compared with the rest of the country. Many communities in the north are in labour markets and travel-to-work areas where there is simply no way to get a job very easily. That is the essential difference between the excluded regions in the south and those in the north.

The noble Lord spoke about simplicity. While he might have been right to castigate the Minister for using administrative arguments in dealing with the first amendment, he is doing exactly the same here. He cannot argue that a man or a company cannot be given a benefit in Newcastle just because, two and a half years down the line, they employ someone in London. That argument does not stand up.

New businesses have been set up in the past predominantly in excluded areas. Therefore, if his approach were adopted, one would expect a large number of new businesses to be established in London and the other excluded regions. What assessment have he and the Labour Party made of the cost of such an extension of the area? I know that he—and, indeed, I—are not absolutely convinced that £940 million is the cost of this programme, but no doubt he has a view as to what it is likely to be. I suspect that the cost of extending the provision will be double what is in the estimates already, which means a potential cost of another £940 million. Even if it is £500 million, has the noble Lord contemplated that? How does that extra expenditure fit into the Labour Party’s commitment, under the Fiscal Responsibility Act, to halve the deficit over the next four years?

I am very grateful to my noble friend Lord Newby; he has done my job admirably on these amendments. However, I start by returning to fairness. The reason for the Government introducing the holiday is their belief that it is fair that people and regions that have become overdependent on public sector jobs are given additional help as the economy has to rebalance. I therefore agree completely with my noble friend. It is clear that the noble Lord, Lord McKenzie, means to misconstrue the purpose of the Bill.

We in the Government are doing other things to lift the burden of national insurance contributions on businesses right across the country, notably by raising the threshold by £21 per week above indexation from 6 April 2011 and by reducing corporation tax rates. Those very considerable measures are benefiting businesses right across the country, reversing the damaging effect of the Labour Government’s jobs tax. This particular measure is not about fairness across the country in that sense but about fairness to those regions that, under the previous Government, became overdependent on government employment. This is a way of targeting resources to enable new businesses to grow in those regions.

My noble friend Lord Newby went on to ask the noble Lord, Lord McKenzie, about the additional cost of the scheme. The Government estimate that if the scheme were to go national it would increase the projected costs of the scheme by about 70 per cent, so my noble friend is completely right that this could be a significant additional expenditure. He has made the point that I was not going to make, although he is quite right; it is yet another example of Labour’s unfunded spending promises.

As for other issues on the excluded regions, the reason why Greater London, the eastern and the south-eastern regions are excluded is principally because the proportion of the population in public sector employment in those regions is lower than in any other parts of the UK. Also, in addition to my noble friend’s point, noble Lords might wish to be reminded that during the public evidence session on the Bill, representatives from the Federation of Small Businesses and the British Chambers of Commerce made it clear that the south-east is more resilient than the rest of the UK and that the formation of now businesses would not be harmed significantly if the holiday was not available in these regions. The Government agree with that assessment.

There is then the question of having pockets of deprivation with high claimant count in particular parts of the excluded region. The Government of course acknowledge that areas smaller than regions have particular concentrations of needs. That is reflected in our looking for more efficient mechanisms than this one for addressing those more local needs. For example, my right honourable friend the Chancellor of the Exchequer announced earlier this month that the Budget will introduce new enterprise zones across parts of Britain. Those zones have great potential but need that extra push from the Government and local communities working together. Such enterprise zones would be expected to be far, far smaller than regions. There are other, fairer and more appropriate ways of dealing with the issues which the noble Lord, Lord McKenzie, raises perfectly reasonably. They just do not happen to have anything to do with this holiday, which is about dealing with an unbalanced economy as far as dependence on public sector jobs is concerned.

In conclusion, the holiday is targeted specifically at regions and countries with the highest proportion of public sector dependence. It is there to encourage new businesses to start up and to take on employees in those areas. I will not be drawn into updating now on the take-up—there will be other occasions for that—but one would expect it to increase over time. We will no doubt discuss a little later today the form of reporting that is appropriate. Expanding the holiday to the whole country would undermine the very purpose and rationale of the policy. I ask the noble Lord to withdraw his amendment.

My Lords, I thank the Minister for his reply and the noble Lord, Lord Newby, for his contribution. We do not misconstrue the purposes of the Bill; we support projects that help to rebalance the economy, and we see that focusing in part on where there is high public sector employment in an area is one way of doing it. It is not the only way, but we have acknowledged that the Bill can make a contribution in that respect.

The noble Lord speaks as though there is almost a huge divide between the excluded regions and those that are included. From the ONS public sector employment statistics bulletin for quarter 1 of 2010, let me run through the list of percentage by region of identifiable public sector employment. The point that I reiterate is that the spread between the regions is relatively narrow, and that London misses out on this basis. The north-east is said to have 25.1 per cent, the north-west 22.3 per cent, Yorkshire and Humber 22.6 per cent, the east Midlands 18.5 per cent, the West Midlands 21 per cent, the east 16.6 per cent, London 21.1 per cent, the south-east 16.8 per cent and the south-west 21.3 per cent. To chop off three of those areas, as though they are a completely distinct part of the economy with in no way the same reliance on public sector employment, seems incredibly flawed as an argument. It is not just a question of looking at little pockets within regions, as the overall regional statistics show a close match across the regions.

The noble Lord, Lord Newby, said that we were talking about £1 billion for regional development—fine; no one is looking to take £1 billion away from the project. However, he again referred to “more affluent” regions. I am sure that parts of all regions are affluent, and parts of all regions are deprived and with high unemployment. One accepts that there are special challenges in some of the northern regions, and one would not want to detract the support available to those. Luton is in the east of England. It still has high levels of deprivation, but the spread across the region shows that parts to the east are distinct, with much lower wage economies, higher employment infrastructure deficits and real challenges. They are every bit as deserving of the benefit of schemes such as this as anyone else.

The noble Lord rightly challenged me on the costs. I refer to figures given by the Minister, but the purpose of the probing earlier—I note that the Minister remains coy on the point—was to question whether the allocation made will in any way be spent. I think that the proposition that underwrites the estimate is that this will support something like 800,000 jobs, and those jobs will have to be created outside the excluded regions by start-up businesses over a period that has about two and a half years to run. That is a tall order. If it can be achieved, great, but there is headway in the allocation to extend the scope of the scheme, and we support that.

I have tried to deal with the points raised. We think that the provision is unfair. All regions should have the opportunity to benefit from this. We shall get to an amendment tabled by one of my noble friends shortly, following which there would be scope, through monitoring, to dampen down the scheme if it proved to be overheating. However, there is no sign of that. It is a pity that the Minister was not even able to give us an update; we are almost at the end of the year. Some £50 million is meant to have been spent, which would mean that at the very least 25,000 businesses would have signed up. I suspect that we are nowhere near that on the basis of the figures of 1,500 that were discussed a couple of months ago in the other place. Having said all that, we have had a brief but, I hope, full encounter on the subject, and I wish to test the opinion of the House.

Amendments 3 and 4 not moved.

Clause 5 : Starting a new business

Amendment 5

Moved by

5: Clause 5, page 3, line 35, at end insert “, or

( ) a non-trading charity

My Lords, we debated this issue in Committee and it was the subject of debate in the other place as well. However, we found the Government’s response to this amendment and the concept behind it somewhat unconvincing. Their view seems to be that this measure, in this Bill, revolves around what they define as the wealth-creating sector. That seems, by definition, to exclude charities from consideration. Why should the Bill be subject to this narrow definition, which seems to suggest that charities do not contribute to wealth in our society? That view is buttressed by the Government’s arguments that reflect the very narrow definition of what they regard as the nation’s wealth. In other words, it is to do with jobs but not public welfare—it is about people being employed but not what they are employed to do. In other words, it has nothing to do with quality of life.

I know that the Minister will regard my presentation of these arguments as indulging in a flight of fancy that is a little different from the day-to-day preoccupations of the Treasury. However, I ask noble Lords to consider the obvious point that in these difficult times we should give hope to our people, as this measure seeks to do. We should give help and support to those thousands of our fellow citizens who will lose their jobs in the public sector as the Government say that they cannot afford to employ them all. They rarely deploy the argument which they use regularly at party conferences and elsewhere, when rhetoric plays its part, that they wish to reduce the size of the state as they consider that that would benefit the nation. In reducing the size of the state they are, by definition, reducing the number of people in public employment not because they cannot be afforded but because, in the Government’s opinion, society is better when the Government play a smaller part. The House will not be surprised to hear that we take a somewhat different view about wealth and the virtues of public employment.

The previous amendment was directed at those parts of the country which the Minister indicated were more dependent on public sector employment which is to be subjected to such a serious assault from the government cutbacks. Why can we not help these areas by creating jobs in bodies such as non-trading charities? Of course, I appreciate that it will be a modest contribution and I subscribe to the view that the noble Lord will no doubt put forward in his reply that the Bill overwhelmingly concentrates on businesses which create wealth. I am not in any way, shape or form against that endeavour. In fact, my party has made clear that it supports the development of small businesses. However, I am against exclusion for no obvious good reason. I do not see why non-trading charities should not be included.

The Minister’s argument in Committee partly revolved round the fact that the matter is said to be outside the main purposes of this legislation and that we should not bring in something that is somewhat extraneous. However, the number of Bills which the Treasury can introduce over the year is fairly limited. The noble Lord will be all too well aware of the fact that apart from the Finance Bill, in which this feature is scarcely likely to be addressed, Treasury Bills, other than those which have a very specific operation, are few and far between as the Treasury competes with other departments for legislative time in both Houses. We therefore propose an amendment of a most modest but beneficial kind that—even if the Minister thinks it is not entirely appropriate to the main purposes of this modest measure—is not far distant from the objective of creating jobs on a very small scale in areas where public employment is being reduced. I maintain that non-trading charities can play a modest part in creating those jobs.

Given the government arguments thus far—and that is why we are continuing this debate beyond Committee—I see no reason why the amendment should not commend itself to the Government, and that is why I commend it to the House. I beg to move.

My Lords, the noble Lords who put their name to the amendment have again raised the issue of making non-trading charities eligible for the employers national insurance contribution holiday. This matter was debated at some length in Committee and I again suspect that what I am going to say will not come as a huge surprise to the noble Lords concerned. Nevertheless, I will do my best to persuade them to withdraw the amendment.

I thought that the noble Lord, Lord Davies of Oldham, was going to go off on some flight of fancy. I do not think that he went off on any flight of fancy, and he kept entirely to areas that the Treasury takes extremely seriously. I was therefore disappointed, because I expected the noble Lord to go down some exotic new avenue—but he did not.

However, in the first half of his remarks, he did not recognise that an important group of charities will get the benefit of this holiday. It is important for me to confirm that new charities in qualifying areas are eligible for the holiday if they are carrying on a business. I appreciate that the noble Lord later on in his remarks started to distinguish between trading and non-trading charities, but this is an important point. For example, were employees to be taken on for a charitable trade, such as providing education or healthcare services, the charity is potentially eligible for this generous relief. Amendment 5 would specifically extend eligibility to new non-trading charities in qualifying areas. As, to be fair, the noble Lord recognises, this would not support the Government’s objective of encouraging new entrepreneurs to set up businesses in areas with a high proportion of public sector employment. The noble Lord suggested that his amendment would be a nice-to-have add-on, if I may crudely paraphrase him. However, he recognised that it does not chime in with the core purpose of the Bill.

Just as we have other ways of supporting regions that are not covered by the holiday, the Government of course have other important ways in which they support the critical work of charities, not least in their contribution to the big society. We provide substantial support to charities and charitable giving with tax reliefs worth more than £3 billion each year. Gift aid and relief from non-domestic rates are each worth around £1 billion a year. I remind noble Lords that, across the UK, charities that are employers will also benefit from the increase in the employers national insurance contribution threshold by £21 a week, plus indexation, that comes into effect on 6 April.

Because I think it is important to deal with the technical details of amendments and give them their due, I also respectfully point out to the noble Lord that the amendment on its own is somewhat defective as it does not deal with the many difficult issues that would arise if the holiday were extended to non-trading charities. For example, it would be necessary to consider carefully the commencement date of such a change. The scheme has been live since September 2010 and the relevant period commenced in June 2010. We do not think that any such amendment could be made with retrospective effect as the amendment implies. The legislation would need to provide a start date for charities. Is this to be the date of establishment or some other date—for example, the date it is registered by a regulator such as the Charity Commission or the Office of the Scottish Charity Regulator? What about the existing holiday rules covering businesses that are taken over or transferred or where there is a change in activities? Would these rules need to be applied so that only genuinely new charities qualified or would they need to be modified to cater for cases where charitable status might be obtained at some point after the activity had commenced? Therefore, there are considerable technical problems with the amendment.

In any case, as the noble Lord, Lord Davies of Oldham, recognises, any benefit ensuing from such complicated changes is likely to be limited, as we estimate that relatively few non-trading charities employing staff are likely to be set up over the holiday period. By including non-trading charities, we would undermine the policy rationale for the holiday, which is to encourage new businesses to be set up and to take on employees. For example, if charities were included, employers of nannies and carers could claim that they should also be included in the holiday. We have drawn a line at trading because that is what supports the overarching policy.

In conclusion, the scheme specifically targets new businesses that create new employment in areas that require it most. If a new charity were carrying on a business, of course it would qualify, but extending the holiday to non-trading charities would greatly complicate the scheme. Rather than channel resources through this scheme and impose administrative burdens on new charities, the Government consider that it is more efficient to provide support through existing mechanisms to all charities, as well as significant benefits, in the ways that I have outlined. Therefore, I ask the noble Lord to withdraw the amendment.

My Lords, I am grateful to the noble Lord for his precise exposition of the Government’s case against the amendment in principle. I do not think that we need the overkill of the technical limitations of the amendment. It is rare for the Opposition to table amendments that do not have certain technical imperfections, but when a Government have the will, they certainly have the way to get past those imperfections. Of course, the Minister is really piling Pelion upon Ossa. He is saying that he is not having this amendment at any price on a fairly straightforward and clear principle; nevertheless, so far as the Opposition are concerned, the argument is made on unconvincing grounds. However, I beg leave to withdraw the amendment.

Amendment 5 withdrawn.

Clause 7 : The appropriate amount

Amendment 6 not moved.

Amendment 7

Moved by

7: After Clause 10, insert the following new Clause—

“Annual report by the Treasury

( ) The Treasury shall, following the day on which this Act is passed, review the operation of the regional holiday scheme under Part 2 of this Act, and provide an annual report to Parliament.

( ) Each annual report shall set out, by region—

(a) the number of businesses availing themselves of the secondary contributions holiday;(b) the number of employees designated as qualifying employees under the scheme;(c) the total expenditure saved by businesses under the scheme; and(d) an assessment of the demand to apply the regional holiday to different areas of the country.”

My Lords, this amendment again relates to an issue that we addressed in Committee. On that occasion, the Minister gave us the benefit of his perspective on this matter and indicated the ways in which the Government would be held properly accountable for their work in this area, as in all aspects of Treasury matters, and indeed wider than that.

The amendment relates to the specific nature of the holiday. We are seeking an annual report in the terms adumbrated by the amendment because this is a most interesting scheme. If not experimental, the scheme certainly has a significant dimension, which is, as we discussed when we debated the earlier amendments on the regional aspects of the scheme, the control factor attached to it. The scheme will operate in the majority of the country, although it will exclude the south-east, London and the eastern region. Therefore, after a year, we shall be able to see how much progress has been made on job creation for those who have lost their position and where there are fewer jobs in the public service and we shall have a control position as regards those regions that are not in the scheme. We may be able to see the benefit of this initiative by the Government.

To my noble friends on the Front Bench, that seems to be a good reason why we should have a precise annual report on this scheme and on how it has worked. Although I quite understand that the Minister’s defence is likely to be that the Treasury is always open and accountable and that it has measures whereby it makes matters explicit to the nation, I would not be the first noble Lord to have to confess, even with the experience of being on the Treasury Bench, that from time to time there has been a degree of obscurity that makes it extremely difficult to analyse just what has transpired in schemes and their effectiveness. This amendment would give the Treasury a golden opportunity, after one year, to make quite clear the success or otherwise of the scheme, which we wish success. I beg to move.

My Lords, Amendment 7 would insert a new clause into the Bill with the aim of requiring the Treasury, following the day on which the Act is passed, to review the operation of the regional employer NICs holiday under Part 2 of the Bill and to provide an annual report to Parliament. The amendment would require the annual report to contain information by region. At the risk of being accused of piling Pelion on Ossa, it is important to get the comparison between what is proposed by this amendment and what I shall go on to say the Government propose to do. It is important to get it straight. I hope that I am not going into any unnecessary detail but I will clarify what is going on in the proposed amendment and what the Government seek to do.

The amendment requires that the annual report should contain, by region,

“(a) the number of businesses availing themselves of the secondary contributions holiday;

(b) the number of employees designated as qualifying employees under the scheme;

(c) the total expenditure saved by businesses under the scheme; and

(d) an assessment of the demand to apply the regional holiday to different areas of the country”.

As I said in Committee when we discussed amendments of a similar nature, I think that this amendment is motivated by a wish to encourage transparency—the noble Lord, Lord Davies, has confirmed that—and to ensure that proper consideration is given to how the holiday operates in practice. I shall attempt to explain to noble Lords why the amendment is unnecessary.

First, as I said in Committee, my honourable friend the Exchequer Secretary explained in the Public Bill Committee in another place that there is no budget as such for the scheme. Anybody contemplating starting up a new business can be confident that there is no budgetary constraint on the scheme. The holiday will continue as proposed regardless of how many successful applications are made. If a large number of additional new businesses are formed as a result of the policy, this would help to increase Exchequer revenues. The expected costs of the scheme were set out in the policy costing document at Budget 2010.

Secondly, on the point on which the noble Lord, Lord Davies, focused his remarks, the Government are committed to increasing the transparency of tax policy-making and of the tax system more generally. To that end, I am happy to repeat the undertaking, which I have mentioned before at different stages of this Bill, made by my honourable friend the Exchequer Secretary in another place to provide to Parliament and the public updates before the end of the calendar year on the operation of the scheme, including information at regional level. As I said in Committee, we envisage a factual report regionally and nationally covering the number of new businesses applying, the number of applications rejected, the number of qualifying employees for whom a holiday has been claimed and the amount claimed.

The only significant difference between the commitment that the Government have made and the amendment that we are debating is that the latter would require,

“an assessment of the demand to apply the regional holiday to different areas of the country”.

I am not completely clear about the meaning of these words and how what is suggested would operate. The noble Lord, Lord Davies, did not address the detail. The substantive point is that the Government do not see the need to report annually on the demand to apply the holiday to different areas of the country. We can assess that now and I do not expect the assessment to change. There is, of course, strong demand from excluded regions to enjoy the benefit of a holiday that they would like to have, but we have debated that already and the House has this afternoon formed a view on excluded regions. The position remains as we have debated it, so I am not sure how that part of the amendment would achieve anything.

The Government’s objective remains to target resources at those regions most in need. The Government do not expect the objective to change. By tabling this amendment again, the noble Lord has given me the opportunity to restate for the avoidance of doubt that we will come forward with a transparent and comprehensive report on an annual basis. With those reassurances, I hope that the noble Lord will withdraw the amendment.

My Lords, I am once again grateful to the Minister for his identification of the way in which the Government are seeking to meet the clear objectives of transparency and effectiveness with regard to the scheme. Of course, I understand that because the scheme has no particular budget there is an aspect of parliamentary control that is clearly not possible in the measurement of the budget. My noble friends support this amendment because we see the value of transparency with regard to the scheme, particularly a scheme that is partial in its impact. Of course I understand that the Government have sustained their position about the limited geographical range of the scheme, but there is bound to be greater demand for transparency in a scheme that does not apply to areas where there are none the less pockets of deprivation, as we sought to identify in the past. Clearly, they would have benefited from the scheme had that been the case.

I accept what the noble Lord has said about the process by which the Government will be transparent on the operation of the scheme. I want to make it clear to him and the Government that we will continue to take a close interest in this scheme. It may be a modest measure, but it is highly significant and, in certain aspects, groundbreaking in the way in which it has been framed. That is why we will hold the Government to account on the extent to which they reflect accurately the operation of the scheme. With that, I beg leave to withdraw the amendment.

Amendment 7 withdrawn.

Clause 11 : Interpretation of Part 2

Amendments 8 and 9 not moved.