National Insurance Contributions Bill

The Economic Secretary knows that it is not a specific proposal. I was floating an idea, which is part and parcel of exactly what we are trying to achieve with the flat tax commission: simplifying the whole taxation system, which is a long overdue goal. In many ways, clause 1 seems to be worded with that sort of change in mind. In summing up, I hope that the Economic Secretary can confirm the Treasury’s intention and indicate how such a process might be managed. I want to touch on three other aspects. First, there is the regulatory impact assessment in which the Government attempted to assess the Bill’s potential impact. They concluded that the combined impact of the measures"““will not affect small businesses disproportionately.””" However, it should be remembered that small businesses are most dependent on attracting quality personnel, and therefore need to be able to offer tax-efficient employee incentive schemes. As the Government have already announced, the powers in the new Bill will be used first and foremost to tackle NIC avoidance through employment-related schemes. It is suggested that that will disproportionately affect businesses that the Government originally intended to promote by introducing tax-efficient employee incentive schemes. The position is made worse by the fact that employers cannot share any new unexpected liability to NICs with their employees. Secondly, there is the issue of disclosure, which the Paymaster General mentioned. Clause 7 suggests that the regime for NICs and income tax will be similar. It would be useful to hear from the Treasury how it will work alongside taxation specialists to ensure a smoothly operating system. Twelve weeks seems a relatively short period, given the importance of the work that must be done, and the differences between this regime and the income tax regime introduced in the Finance (No. 2) Act 2005. Naturally all sides would like as long a lead-in time frame as is practical. Much hinges in the future implementation of the intentions set out in this enabling legislation on regulation-making powers. The Bill brings NICs into the world of tax avoidance disclosure, and opens the way to retrospection. However, its operation, achieved by specific regulations that are highly technical and complex, will not be subject to full parliamentary scrutiny. Let us be honest: without significant outside expert help, there is little headway that any Opposition spokesman can forge even in Second Reading debates such as this. However, if such technical legislation with its retrospective element is brought in only via regulation, even when it is approved by statutory instrument, we run a real risk of adding to the statute book a series of poorly thought-through laws. My biggest worry is that that will result in employers and employees alike running the risk of being deprived of their property in an arbitrary manner.