I beg to move Amendment No. 46, in page 52, line 27, at the end to insert:
“Provided that the said amount shall be one penny in respect of those persons who are not liable to pay, or who under section 102 of the National Insurance Act 1965 elect not to pay, the employee's insurance contribution” .
With this Amendment I have suggested that we take Amendment No. 49, in page 54, line 7, at end insert:
“‘employee's insurance contribution’ means a contribution other than a graduated contribution payable by an employee under the National Insurance Act 1965 or any amendment thereto passed after the passing of this Act” .
The purpose of this Amendment is to exclude considerable groups of people from the incidence of Selective Employment Tax. There are two main groups which the Amendment would exclude, those of retirement age and many of the married women who work part-time. It would also exclude other married women. I submit that if the Amendment were accepted it would deal with a very large part of the problem of Selective Employment Tax as it affects retired people and part-time workers.
A great deal of the argument of Niall MacDermotthe Financial Secretary and of hon. Members opposite about this tax has proceeded on the assumption that because we follow the National Insurance stamp system, the groups of people whom we on this side of the House desire to exclude from the tax cannot be excluded. Therefore, in this Amendment I have deliberately attempted to use the National Insurance system in order to exclude those very people. My contention is that if the Government had chosen not to follow [column 1596]the employers' contributions but to levy tax only in those cases where the employers' and employees' contributions were payable, the tax would have been infinitely less damaging in its effect.
I deal first with the case of retired people. Anyone who employs a retired person for more than eight hours a week is liable to pay the employer's part of the National Insurance contribution. So he is already liable to pay 13s. 4d. a week for a man. Because he is liable as an employer, as the Bill stands without the Amendment, he will have to pay in respect of that retired person another 25s. a week. That makes the cost of employing a retired man 38s. 4d. a week before one penny has been paid to the retired person, and he has to pay that even though the retired person works for only a few hours more than eight hours a week. Our contention, therefore, is that the effect of this tax will be to make an employer stand off a number of part-time retired people. Economically those people cannot go elsewhere to work, so it can only redound to their own disadvantage if this tax continues in its present form.
Several things could happen. Either the employer could stand off the person, or he could submit that the man is self-employed. I suppose that if a man goes out to do a bit of gardening for two or three people one can say that he is holding out his services for hire and that he is self-employed. Thirdly he could be stood off for one or two weeks and then be employed for a week, and one could cut the incidence of the tax in that way. Fourthly, there could be large-scale evasion of this tax through people not declaring that they are [column 1597]employing retired people for a few hours or for one or two days a week.
We feel that if Niall MacDermotthe Financial Secretary were to accept the Amendment the way would be eased for retired people to continue in work. We do not feel that they should attract the Selective Employment Tax. I have already said that for a man an employer would have to pay 38s. 4d. a week in National Insurance contributions and Selective Employment Tax, and for a woman the corresponding amount would be 23s. 10d. a week. This is a great deal of money for part-time work, performed by retired people. That is one group of people whom the acceptance of this Amendment would exclude from the operation of the tax.
The second group of people concerned in the Amendment are married women. As the Financial Secretary will know, having undoubtedly been told by the relevant Department, married women can opt whether or not to pay National Insurance contributions. The employer will have to pay those contributions in any event, but the married woman herself can decide whether or not she wants to pay her part of the contribution. I do not, in common with many other married women. It does not pay many married women to pay National Insurance contributions. Not a lot of them know this. If a lot more knew it, far fewer would pay.
But a married woman gains by paying National Insurance contributions only if she is considerably older than her husband or is separated from him and does not know his insurance record. That means that comparatively few married women themselves pay National Insurance contributions. This is not surprising, because they get very little return in benefit if they pay contributions on their own account. A married woman will not get the full retirement pension if her husband is living; she will get only the difference between what he would have got for them and the single rate. It is a comparatively bad bargain for the ordinary married woman.
I see that the Financial Secretary is getting a good deal of tutoring from the Parliamentary Secretary to the Ministry of Pensions. He need not bother. I shall tell him all he needs to know about it. I reckon that I know a good deal more about the insurance of married [column 1598]women than the Parliamentary Secretary. If the Financial Secretary accepted the Amendment, that would have the effect of excluding from the incidence of the tax married women who opt not to pay contributions, that is, to exclude the large majority.
One of the problems concerned with the tax has been that of married women who do part-time work. The Government have freely admitted that this is one of the strongest cases for asking for some relief from the tax. An example makes this clear. A retailer perhaps cannot get a person to work full time for him. Therefore, instead of having someone to work, say, 36 hours a week, he has to employ three women to work 12 hours a week each. That means that he must pay three times the amount of tax that he would have to pay if he could get one person to do the same amount of work. This is patently unfair on the retailer.
If the Government were to accept the Amendment a large part of their problem would be dealt with. I know that the Financial Secretary will say in reply that this would discriminate unfairly against those married women who opted to pay the full contribution, or who had to do so. If the employer does not have to pay in respect of the vast majority of married women, he is very much better able to pay for the minority who choose to make their National Insurance contribution. I admit that there are anomalies, but the main part of the problem would be dealt with.
There is a third group of people who do not have to pay the employee's part of the National Insurance contribution. It is a small group, consisting of people undergoing full-time education or unpaid apprentices. I refer only briefly to this group because it does not comprise a very significant number, but a number of university students who do vocation work. Theoretically, they are undergoing full-time education.
They might go into a factory to do a certain amount of scientific work, and it is very good for them to do it. Perhaps they do not earn a great deal, although they may be paid a certain amount. It would be very helpful if they were excluded from the incidence of the tax, because it would cost the employer quite a large amount to pay [column 1599]for them. Perhaps there is some question that they would not be liable as it is, but perhaps the Financial Secretary can clear that up.
What I am mainly concerned with in the Amendment is to exclude retired people and the vast majority of married women from the incidence of the tax. I hope that the Financial Secretary will accept the Amendment in spirit, because it would solve very many of his problems, and problems which the House as a whole desires to see solved.
My hon. Friend the Member for Finchley (Mrs. Thatcher) has made an unanswerable case and, but for the unhappy performance of the Government on the previous Amendment, I should have assumed that the Financial Secretary would rise at once to accept this Amendment. But it seems clear that the Government are adopting a wholly unreasonable attitude irrespective of the case put. If, at the last election, it had been said by any of my hon. Friends that a Labour Government when returned to power would tax the employment of blind people and use some of the money to subsidise the manufacture of bingo machinery, no one would have believed them. But this is precisely what the Financial Secretary's attitude on the last Amendment amounts to.
I am delighted that my right hon. and hon. Friends put down this Amendment. In Committee, I had an Amendment down, which was discussed with some others, to exclude the employment of retired people from the incidence of the tax. In reply, the Financial Secretary said that there were administrative difficulties about it because retired people, though the great majority, were not the only people in respect of whom an employer-only contribution was made. The hon. and learned Gentleman rested a good deal of his argument against my Amendment on that point of administration.
This Amendment is not subject to that argument. The Financial Secretary will not argue that there would be any difficulty of administration in accepting it. The tax is to be collected on the National Insurance stamp, by increasing the value of the stamp to the very large figures which my hon. Friend mentioned. All [column 1600]that would be needed, as I understand it—I hope that the Financial Secretary, with the briefing he is having from beside him, will correct me if I am wrong—is an arrangement whereby those who already pay on a stamp different from the vast majority, that is, those who pay a contribution based on employer-only plus a few pence for industrial injuries, should continue to pay on a different stamp, that is, the present stamp plus 1s. That is all that would be needed administratively to implement this proposal framed as it now is. Does the Financial Secretary accept that proposition? Like my hon. Friend, I have had a little experience of these matters, and I shall take it that it is right.
We come, then, to discuss the Amendment on its merits. A week or two ago, I asked the Chancellor of the Exchequer how much it would cost to exempt the employment of retired people from the incidence of this tax, and he said that the amount would be £10 million. That is a substantial sum, and one must add for the purposes of the Amendment something, though a good deal less, in respect of married women opting out and the smaller groups to which my hon. Friend referred. But I do not believe that the Financial Secretary will quarrel with me if I say that the total cost, on the basis of the Chancellor's own figures, would be well below £14 million or £15 million.
Will the Financial Secretary rest his argument on that? Will he say that the state of our economy today is so serious that it could not stand the loss of £14 million or £15 million? If he does, the argument will have to be treated with respect, but, in that event, I shall beg him to raise the £14 million or £15 million in other ways, for example, by reducing the premium of 7s. 6d. paid in respect of employment in manufacturing industries, simply redistributing the cost within the structure of the tax. I am sure that the House will agree that that would be a better and more socially more just way of doing things.
Taking first the most important aspect, surely all parties and all Ministers of Pensions or Ministers of Labour have been desperately anxious to encourage the employment of older people. That is, first of all, in their own interests people rust out so much more often than [column 1601]they wear out because enforced idleness is the worst of all killers of older people. Secondly, it is from the economic point of view, because we have a great shortage of labour, and if older people who are fit can be encouraged to work or continue to work we are adding to the labour pool. On both grounds, therefore, we want to encourage the employment of older people.
The Financial Secretary will say that this tax will not operate to the contrary. I put two points to him. First, the tax is intended to discourage employment in the service industries. That is part of the point of it. It is intended to discourage such employment in order to move labour into manufacturing industries. I will not waste time in arguing whether generally that is true, but it is patently not true in respect of the great majority of the older people whom we are discussing. It is unrealistic to believe that someone who has not worked in a factory up to the age of 65 will be able to adapt himself to factory life after that. Therefore, this will discourage employment in the service industries without affecting redeployment. In so far as it operates at all, it will drive these people from employment into unemployment. What good will that do?
Secondly, we are dealing here with people in many cases on modest wages. The older person doing a job of more than eight hours but a great deal less than the 40-hour week today is generally paid a modest wage. The more modest the wage, the bigger the proportionate incidence of the tax. In other words, the more likely is it to operate on the mind of the employer to make him say, “If I have to pay this wage for this kind of work plus this tax, it is not worth my while. I shall get rid of this man.” I warn the Financial Secretary that a great deal of the employment of older people, perhaps particularly in the country and perhaps in offices, will be put in jeopardy. If the tax is imposed on top of the rather marginal considerations that cause them to be employed at all, sometimes, to the credit of employers, the semi-charitable motives that cause them to go on employing someone of some age, a great many people who could have been carrying on in work will cease to be in work. That will be the direct and inevitable consequence of this Measure and of the Govern[column 1602]ment's action in respect of it. Again, what good will that do anybody?
The other main field, as my hon. Friend said, is that of married women. The typical married woman is the part-time employee. Again, it has been the policy of all Governments to increase the amount of labour available through part-time married women, many times with skills acquired before marriage, such as teachers, going back into work. If they go into productive industry, the Financial Secretary will say that that is all right and they will get a premium. If they go into Government employment, such as teaching, there is no harm done, but if they want to go into service industries—and to many people service industries, and retail distribution is typical, represent the natural and inevitable field—a very heavy impost relative to their earnings is imposed, and one gets the same effect on their respective employers as one does in respect of the older people.
Therefore, one comes to the fundamentals of this tax by applying it to retirement pensioners and part-time married women. The Government will get a negligible reinforcement of the manufacturing or industrial labour force. They will pay for that by driving a number of people out of work who otherwise would be in work. In return they will get between £10 million and £15 million, but I warn the Government that that figure is gross. In so far as people are driven out of employment and their taxable earnings eliminated, there will be a compensating revenue loss to set against this quite moderate gross figure.
We are at the crunch of the case. If the Government persist in applying this tax in this way they will convince many moderate minded people outside that they do not know what they are doing—that, having decided at the last moment on this tax, they are determined to bulldoze it through regardless of consequences. What effect do they think it will have on the desperately critical opinion, anxious about the state of our economy, if people outside see the economy being directed by a Government who apply a tax of this sort without apparently understanding its direct consequences? Obstinacy by the Government on this Amendment may go in its [column 1603]repercussions a good deal wider than the social damage that it will do.
I am glad to have the opportunity to follow my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), who has made a remarkable speech. I am sure that most of us on this side of the House feel that he has spoken for us fully and with great clarity and has enabled us to cut short our own remarks. Nevertheless there are one or two comments I want to make.
The situation has changed since we discussed this tax in Committee. The Chancellor has told us his intentions. The banks will not be allowed to help. He intends the tax deliberately as a deflationary measure, and as the first victims he is singling out those covered by this Amendment, the part-time workers—retired people and married women.
I appreciate that the Financial Secretary has a difficult job defending the tax. In discussion in the last Amendment, he made a case in suggesting that blind people were amongst the limited number for whom it was possible to make special arrangements. But those covered by this Amendment are among those for whom no special arrangements are possible. My right hon. Friend is right in suggesting that their interests are to be sacrificed and their jobs jettisoned. To do this to them is to achieve nothing. No gain at all will accrue to the Government or to the economy. It will be impossible for the Government to explain to people why they have placed upon employers such a very heavy deterrent before these people's services can be taken up.
There are many occasions during the proceedings on a Finance Bill when it is perhaps possible to take time to tell a Government of their many sins and offences and to stir up strong feelings.
I do not believe that the Amendment is one of those occasions. It is a very serious one, and it will place on the shoulders of the Financial Secretary, for whom I have great sympathy, a very unhappy task. I hope that he will be able to tell his right hon. Friend that the arguments which have been presented tonight, particularly those advanced by my right hon. Friend the Member for [column 1604]Kingston-upon-Thames, are arguments which he cannot answer, does not wish to answer, and that the purpose for which he has sat on the Treasury Bench tonight—to defend the integrity of this tax at all cost—is one which he would rather not discharge.
I wish, first of all, to make a plea to the Joint Parliamentary Secretary to the Ministry of Pensions and National Insurance, whom we are delighted to see listening to the debate. I hope that, in the next few minutes, he will quietly and secretly take out the Treasury brief from the Financial Secretary's file and substitute for it a brief from the Ministry of Pensions and National Insurance. Then, at last, we shall see a glimmer of light and get some change.
I want now to put forward one or two arguments based on the points which the Financial Secretary himself made when we last debated this matter on 29th June. The hon. and learned Gentleman's first argument was that it is not possible administratively to grant exemption. His actual words were:
“It is not possible administratively to grant exemptions which are dependent upon the occupation of the employer or the employee.” —[Official Report, 29th June, 1966; Vol. 730, c. 1948.]
He went on to explain that that was because of the National Insurance system.
I suggest that that argument is bogus. We already have a refund for special households and for charities; yet in both cases there is no separate National Insurance category. For that reason, the hon. and learned Gentleman's argument does not stand up. It applies in exactly the same way to the refunds which are available for local authorities, for agriculture and other bodies. None of them can be identified with separate National Insurance categories; yet in each of these cases the Government have found a way in which they can be treated differently from the way proposed for part-time workers, married women and the like. In my view, the argument on which the Financial Secretary based that part of his case in the last debate does not stand up.
The second argument which he used is that there has not been time to work out the administrative arrangements. If it can be done for special households and for charities, why can it not be done for [column 1605]retirement pensioners, married women and part-time workers? If the Government have not had time to do their homework, it is monstrously unfair that these sections of the community should be the people who should suffer, owing to the Government bringing forward this proposal at the last minute without taking time to think it out properly.
We all know that, once a proposal finds its way on to the Statute Book, it is exceedingly difficult to change. It is all very well the Financial Secretary saying that the Government will keep these matters carefully under review and that they are sympathetic. But once provisions are put in a Statute it is far more difficult to change them than if the changes are embodied in the legislation while it is going through the House.
I wish to make a special plea to the Financial Secretary about part-time workers. Whatever he may have felt and argued about other categories, he appeared more hopeful about them. In the debate of 29th June, he said:
“I can see that there is a difference, and very special force, in the argument on part-time workers” . —[Official Report, 29th June, 1966; Vol. 730, c. 1957.]
What progress has he made since the Committee stage in finding a way by which part-time workers can have a refund?
If the Government refuse to budge on this and do not act on the powerful arguments put forward, not only by hon. Members on both sides of the House, but by many people outside who know about these matters, they will reap a bitter and well deserved harvest.
I suspected that these Amendments were, in their form, prompted by what I said in Committee, and that has been confirmed by what the hon. Lady the Member for Finchley (Mrs. Thatcher) and the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said. The hon. Lady ended by asking me to accept the Amendments in spirit. I am not sure what the invitation was or what the limitation is. I cannot advise the House to accept the Amendments, but I have a great deal of sympathy with much of what has been said. I do not propose to repeat the arguments which I put forward in a somewhat lengthy speech in Committee. I shall confine myself to the new points raised by this Amendment. [column 1606]
The Amendment covers a particular and peculiar group of people—on the one hand, retirement pensioners who are employed, and, on the other married women and widows who have not elected to pay the flat rate National Insurance contribution. This obviously is not a collection of people whom anyone would have chosen to single out were it not for the fact that they are people whose employers use a particular and special stamp.
When we were dealing in Committee with the question of the retirement pensioners who are employed, the right hon. Member for Kingston-upon-Thames said that here was a class of people whom we could deal with differently, in spite of the general administrative difficulties, because they had a special stamp. I pointed out that, unfortunately, the stamp was not confined to those people because it was also used for married women and widows who elected to pay the flat rate National Insurance contribution. Consequently, we have these Amendments which say, in effect, “If that is the case, let us include them in the exemption” .
Most of the arguments have been based on the particular case of part-time workers in these categories. It is not limited to them; it covers all the workers in these categories, full-time as well as part-time. But the particular arguments are addressed to the supposed effect of this tax upon the employment of part-time workers in these categories. Shortly we shall come to an Amendment dealing specifically with part-time workers, but I am not seeking to take any false point on that.
I appreciate that it is argued that there are more part-time workers in this field, and that bearing in mind the difficulties which the Government say they would have in excluding part-time workers in general, here is a way in which they could exclude some by dealing with this category. But if the Amendments were accepted they would produce a considerable distortion and many anomalies, as the hon. Lady recognised, because they would exempt from the tax not only the employed retirement pensioners and married widows in part-time employment but those in full-time employment, and it would be quite arbitrary and illogical to make the employers' liability for the tax depend on whether or not a woman had [column 1607]elected to pay the National Insurance contribution.
Very few do.
The hon. Lady says that very few do, but I did not hear her when she was a Minister in the Ministry—nor did I hear the right hon. Member for Kingston-upon-Thames when he was a Minister—urging women not to pay their full contribution.
We did not attempt to impose a Selective Employment Tax. The point therefore was not as important as it is now.
It is far more important for the woman than it is for the employer who is affected by the S.E.T. I did not hear her put forward that argument when she was employed in the Ministry, and I suppose that the policy of the Ministry under her Administration, as under this Government, is to urge women in this position to secure their full National Insurance rights.
I was responsible for this Department for some years, and that is not the case.
I will accept the right hon. Gentleman's denial. He has far more experience than I do in this field. I was expressing what I thought to be the position. I will revert to my original statement, which is that I do not recall any propaganda being directed to women urging them not to do it. I suggest that an arrangement which would result in the preferential employment—which is what it would be—of married women and widows who had elected not to contribute, as compared with other women, and which would result in a highly prejudicial and undesirable pressure being put on married women and widows to sacrifice their National Insurance interests and elect not to contribute is not something which we should ask the House to accept.
I was asked by the hon. Member for Finchley what the position was in relation to students undergoing full-time education, and also unpaid apprentices. The position is as she surmised—that students receiving full-time education are not [column 1608]obliged to pay contributions except for any period in which they may be in employment, say, during vacations. No tax would be payable in respect of such students.
Obviously, while a student is at university no tax is payable either by the employer or the student. The question is, what is the situation where a chemistry student goes to work in a consultant's laboratory during the vacation?
If he is in paid employment, then of course the tax will be payable. The same applies to the apprentice. If he is unpaid, no tax is payable, but if he is paid he is in Class 1 from the National Insurance point of view and the tax would be payable.
For these reasons, I must advise the House to reject the Amendments.
Mr. F. A. Burden (Gillingham)
The hon. and learned Gentleman must have been swayed by our powerful arguments, but he is in a difficulty because the Chancellor has undoubtedly told him not to give way under any circumstances. He has implied that he will not give way on a later Amendment dealing with part-time workers but I hope that, because of our arguments, even at this late stage, he will find the Chancellor somewhere and get him to give the hon. and learned Gentleman an opportunity of meeting our case.
The way in which the tax will treat elderly people and part-time workers, including women, will not assist in achieving the object of the Selective Employment Tax to release people from the service industries to go into manufacturing. It will often secure the opposite result. Many distributive firms employ two or sometimes three people for a week because they perform a useful service. If those firms have to pay three amounts of Selective Employment Tax for that work, they will get rid of those part-timers and employ one person full-time. This is the opposite result from that which the tax is designed to have.
This will hit most harshly the elderly and those incapable of working long hours. It will keep out of work altogether aged people who work only a few hours a week. My right hon. Friend [column 1609]made an important point when he said that the cost of the Amendment would be about £14 million. Part-time workers made unemployable by the tax will often be thrown on National Assistance, that cost will go up, and the total cost would be much less than £14 million.
There is a good deal of hardship in my constituency among retired service pensioners in part-time work. In many households there are elderly people who are incapable of looking after themselves and who are helped by someone coming in for a few hours each week. Many of these elderly people are themselves in straitened circumstances. They will have to pay Selective Employment Tax on [column 1610]the part-time help which assists to make their lives bearable.
I believe that the Chancellor has made up his mind about this Amendment, but in view of the next Amendment on part-time workers, I ask the Financial Secretary to take the opportunity to consult his right hon. Friend, wherever he is, to see whether he will relax this rule, which will cause much hardship and will in no way assist to meet the aim with which, we are told, the Tax has been introduced.
Question put, That those words be there inserted in the Bill:—
The House divided: Ayes 123, Noes 185.