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National Insurance Contributions Bill

My Lords, in answer to my noble friend Lord Newby’s point, my understanding is that there is indeed no distinction within the normal income tax and national insurance rules but that it is all a question of trading versus non-trading. I believe that is a test which is independent of whether it would be a company limited by guarantee with share capital, a partnership or anything else. If I am wrong on that point, I will correct myself but my understanding is that the question is independent of the structure of the business. That trading/non-trading question—to express the issue in another way—goes to the heart of what we are trying to achieve by this holiday: an objective to encourage new businesses and new entrepreneurs and for those individuals to set up businesses, as we have already discussed, in areas with a high proportion of public sector employment. It is not that it could, in a wider sense, be a good thing to provide all sorts of other benefits to worthy causes, including non-trading charities. The fundamental purpose of the Bill is to encourage new entrepreneurs to set up businesses. In that context, if those business activities are structured and are charities, it is important and quite appropriate that the trading activity should benefit from the holiday in the Bill. Of course, the Government value the important work that charities do. I heard the noble Lord, Lord Davies of Oldham, talk about the Government in its benign moments valuing the big society. We value the big society at all times. Therefore, by extension, this is indeed a benign government and I am grateful to him for recognising that. Nevertheless, very tough choices have to be made, benign or otherwise. One of the choices we have made is to continue to provide substantial support to charities. So the total relief which charities and charitable giving get are something of the order of more than £3 billion each year. Of course, charities will also benefit from the increase in the employer’s national insurance contribution threshold. We certainly do not forget charities in many other ways. They are a critical component of the big society. For a scheme that is intended to target a particular direction, we believe that it is appropriate for the holiday to apply to, say, a new charity business, which may be setting up a charity shop or an entrepreneurial activity, but that it should apply only in those particular circumstances. I am sure the noble Lord did not intend this, but the tone of his remarks sounded, at some points, as if we were depriving charities of something. It is not that charities in regions of the country, whether the eligible regions or the excluded regions, are being deprived of anything that they now have; it is simply that, with the resources that we now have, we believe that it is appropriate and indeed the purpose of the Bill to encourage the setting up of new businesses in areas with a high proportion of public sector employment.