Work and Families Bill

I fear that, however eloquently I try to explain the position in relation to direct payments, Opposition Members have already made their minds up. They have decided that they want this scheme and, no matter what explanation I give, they will push for it to be developed. I ask them to bear with me a little further. A direct payment scheme would add new responsibilities for employers. Because statutory maternity pay and other payments listed in the new clause are wage replacements, which are subject to the full range of payroll deductions and paid net, direct payment would mean Revenue and Customs becoming a temporary payroller for SMP and other statutory payments to employees of potentially any employer in the country, taking off the full range of payroll deductions. Employers would not, however, lose all their current tasks and responsibilities in relation to those payments. For example, they would remain responsible for making earnings-based contributions such as employers’ national insurance contributions and employers’ contributions to occupational pension schemes. They would also continue to be responsible for completing periodical returns such as the employer’s annual return. Many employers also provide occupational maternity and paternity pay on top of the statutory minimum, which is something that the Government welcome. Handing responsibility for statutory payments to the Government would still leave such employers with the responsibility of making those occupational payments, in addition to having to pass on new information to Her Majesty’s Revenue and Customs. For a direct payment scheme to work properly for both employers and Revenue and Customs, a potentially complex two-way information exchange would be necessary, which, as I have pointed out, would impose new burdens on employers. HMRC would require detailed information to be provided by employers to high standards of accuracy and to tight time limits in order to take on that function, and employers would still need information from HMRC to fulfil their obligations and to take back the payroll at the end of the direct payment period. During the work and families consultation, many people, including the ad hoc advisory group of payroll experts, pointed out that such complex information exchanges could not realistically take place without error. Dealing with the consequences of errors would fall to the employers as a new burden, as employees would in the first instance turn to their employers for an explanation. Of course, the errors would also affect the employees concerned. Given the cost of a direct payment scheme, it does not represent value for money for the taxpayer, which is why we have not moved forward with such a scheme. The administration of such a scheme would not benefit businesses, particularly small businesses.