My Lords, I thank both noble Lords who have welcomed the Bill. The noble Lord, Lord Davies, said that it was a sign of the times that my noble friend Lord Razzall agreed with him, but surely it is a sign of the times that the noble Lord, Lord Davies, agreed with my noble friend. Whoever is agreeing with whom first, it is an extremely satisfactory position for a Minister at the Dispatch Box to find such a general welcome for a Bill.
Both noble Lords asked about the impact of the changes on the administration of the maternity allowance and whether it would be sensible to have a formal review two years after the Bill comes into force. That timetable does not make any sense, because the first payment of class 2 through self-assessment does not have to be made until the end of January 2017, so a two-year review date is pointless. However, both the DWP and HMRC are committed to ensuring that this group of women is not disadvantaged by the way the reforms work and will be keeping the operation of MA under review on a continuous basis. In response to the specific point that my noble friend Lord Razzall raised, it will be possible to see on an ongoing basis whether the number of claimants falls. I assure noble Lords that if there is any sign of that happening, the Government will act to deal with whatever the administrative problem is that has caused it because, obviously, that is not the intention of the legislation.
My noble friend Lord Razzall asked how there could possibly be no Exchequer impact, particularly when the measure is introduced, with people changing from paying monthly to paying up to eight months after the end of the tax year. National insurance contributions are accounted for on an accruals basis, so the important factor is the time period for which the money is due rather than the date on which it is actually paid. It will therefore continue to be counted in the tax year itself.
My noble friend Lord Razzall asked about the impact of the reforms on entitlements for benefits claimants and how that would work. The contribution conditions for benefits are changing. In addition to the maternity allowance, which we discussed, and in order to ensure that the self-employed are not disadvantaged as a result of the changes, the DWP will modify the relevant legislation to safeguard the position of claimants who pay their class 2 NICs by 31 January—the deadline for paying class 2 NICs through self-assessment. This will be done, first, by treating them as having satisfied the relevant contribution condition at the right time and, secondly, by disapplying the 42-day penalty that normally applies where contributions are not paid until after the start of the benefit year.
Questions were also asked about how the self-employed will learn about these changes and make sure that they comply with them satisfactorily.
HMRC and the DWP are working closely together in communicating the class 2 changes to the people who are going to be affected so that key messages are cascaded in a number of ways and a number of times. The department’s communication strategy includes: undertaking customer research and testing some of the
products with customers; HMRC writing to all self-employed customers; an updating of existing customer outputs, such as the small earnings exception renewal letter; making HMRC staff and DWP staff aware of the changes and building the relevant information into call scripts and telephony, where appropriate; and using stakeholder partnerships with intermediary groups, agent organisations and forums to ensure that key messages are understood by everyone so that the self-employed hear the messages through a number of channels and in a consistent way.
Finally, the noble Lord, Lord Razzall, asked whether the effect of these changes on any possible future merger of NICs and income tax would be neutral, negative or positive. The whole question of merging income tax and NICs is fraught with difficulty and complexity. To the extent that these changes would have any impact at all, were any future Government to plan such a scheme, I suppose, if anything, it would be very marginally positive, but in the overall scheme of things and in the context of such a wide-ranging review it would be almost lost in the wash.
This is a short Bill, but as all noble Lords who have spoken have recognised, it is important to simplify the way in which we administer the system and to reduce the scope for avoidance. Therefore, I commend the Bill to the House.